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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
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Commission file number 1-10360
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CRIIMI MAE INC.
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(Exact name of registrant as specified in charter)
Maryland 52-1622022
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(301) 468-9200
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act:
NONE
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(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 15, 1995, 26,350,979 shares of common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Form 10-K Parts Document
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I, II, III and IV 1994 Annual Report to Shareholders
III 1995 Notice of Annual Meeting of
Shareholders and Proxy Statement
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CRIIMI MAE INC.
1994 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote
of Security Holders. . . . . . . . . . . . . . . . . . . . 6
PART II
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Item 5. Market for the Registrant's Common Stock
and Related Stockholder Matters. . . . . . . . . . . . . . 6
Item 6. Selected Financial Data. . . . . . . . . . . . . . . . . . . 6
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations. . . . . . . . . . . . . . . . . . . . . . . 6
Item 8. Financial Statements and Supplementary Data. . . . . . . . . 6
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . . . . 6
PART III
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Item 10. Directors and Executive Officers
of the Registrant. . . . . . . . . . . . . . . . . . . . . 7
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . 7
Item 12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . . . . . . . 7
Item 13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . . . . . . . 7-8
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PART IV
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Page
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Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . 8-15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16-17
Cross Reference Sheet. . . . . . . . . . . . . . . . . . . . . . . . . 18
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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PART I
ITEM 1. BUSINESS
DEVELOPMENT AND DESCRIPTION OF BUSINESS
Information concerning the business of CRIIMI MAE Inc. (CRIIMI MAE) is
contained in Part II, Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations, and in Notes 1, 5 and 13 of the notes to
the consolidated financial statements of CRIIMI MAE contained in Part IV (filed
in response to Item 8 hereof), which is incorporated herein by reference.
EMPLOYEES
CRIIMI MAE has no employees. Services are performed for CRIIMI MAE by
CRI Insured Mortgage Associates Adviser Limited Partnership (the Adviser) and
agents retained by it.
As discussed in Note 1 of the notes to the consolidated financial
statements on pages 62 through 65 of the 1994 Annual Report to Shareholders,
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's best
interest to consider a proposed transaction in which CRIIMI MAE would become a
self-managed and self-administered real estate investment trust. It is
contemplated that substantially all of the agents retained by the Adviser to
perform services on behalf of CRIIMI MAE will become employees of CRIIMI MAE in
conjunction with such a transaction.
ITEM 2. PROPERTIES
CRIIMI MAE does not hold title to any real estate. CRIIMI MAE
indirectly holds interests in real estate through CRI Liquidating REIT, Inc.'s
(CRI Liquidating) equity investment in three Participating Mortgage Investments.
These investments were comprised of two components: 85% of the original
investment amount was a GNMA Mortgage-Backed Security; and 15% of the original
investment amount was an uninsured equity contribution to the limited
partnership (a Participation) which owns the underlying property. During 1993,
CRI Liquidating sold the GNMA Mortgage-Backed Securities, but retained its
Participations. In 1994, CRI Liquidating entered into a revised option agreement
granting the option to an affiliate of the general partner of the limited
partnership which owns one of the properties to purchase CRI Liquidating's
limited partnership interest in such limited partnership on or before November
30, 1997. The aggregate carrying value of these Participations represents less
than 1% of CRIIMI MAE's total consolidated assets as of December 31, 1993 and
1994.
Although CRIIMI MAE does not own the related real estate, the
government insured and guaranteed mortgage investments (Government Insured
Multifamily Mortgages) in which CRIIMI MAE has invested are first or second
liens, or are collateralized by first or second liens, on the respective
residential apartment, nursing home or townhouse complexes. The subordinated
securities in which CRIIMI MAE has invested are collateralized by mortgages
placed on multifamily and commercial property.
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ITEM 3. LEGAL PROCEEDINGS
Reference is made to Note 14 of the notes to the consolidated
financial statements on pages 104 through 105 of the 1994 Annual Report to
Shareholders, which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders to be voted on
during the fourth quarter of 1994.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDER MATTERS
(a), (b) and (c) The information required in these sections is
included in pages 22 through 23 of the 1994 Annual Report to Shareholders, which
section is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Reference is made to Selected Consolidated Financial Data on pages 21
through 22 of the 1994 Annual Report to Shareholders, which section is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 24 through 55 of the 1994 Annual
Report to Shareholders, which section is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to pages 57 through 61 of the 1994 Annual Report to
Shareholders for the consolidated financial statements of CRIIMI MAE, which are
incorporated herein by reference. See also Item 14 of this report for
information concerning financial statements and financial statement schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a), (b), (c) and (e)
The information required by Item 10 (a), (b), (c) and (e) with regard
to directors and executive officers of the registrant is incorporated
herein by reference to CRIIMI MAE's 1995 Notice of Annual Meeting of
Shareholders and Proxy Statement to be filed with the Securities and
Exchange Commission no later than April 30, 1995.
(d) There is no family relationship between any of the directors and
executive officers.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to CRIIMI MAE's 1995 Notice of Annual Meeting of Shareholders and
Proxy Statement to be filed with the Commission no later than April 30, 1995,
and Note 3 of the notes to the consolidated financial statements included in the
1994 Annual Report to Shareholders, which section is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to CRIIMI MAE's 1995 Notice of Annual Meeting of Shareholders and
Proxy Statement to be filed with the Commission no later than April 30, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others.
Of CRIIMI MAE's five officers, two are executive officers who serve on
CRIIMI MAE's Board of Directors. CRIIMI MAE's 1995 Notice of Annual
Meeting of Shareholders and Proxy Statement to be filed with the
Commission no later than April 30, 1995, and Note 3 of the notes to
the consolidated financial statements, included in the 1994 Annual
Report to Shareholders, which contain a discussion of the amounts,
fees and other compensation paid or accrued by CRIIMI MAE to the
directors and executive officers and their affiliates, are
incorporated herein by reference.
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As discussed in Note 1 of the notes to the consolidated financial
statements on pages 62 through 65 of the 1994 Annual Report to
Shareholders, CRIIMI MAE's Board of Directors has determined that it
is in CRIIMI MAE's best interest to consider a proposed transaction in
which CRIIMI MAE would become a self-managed and self-administered
real estate investment trust.
Under the terms of the proposed transaction, CRIIMI MAE would acquire
the advisory business conducted on CRIIMI MAE's behalf and certain
other mortgage investment, servicing, origination and advisory
business from C.R.I., Inc. and its affiliates (CRI). CRI is wholly-
owned by William B. Dockser and H. William Willoughby, who are
executive officers and directors of CRIIMI MAE.
(b) Certain business relationships.
CRIIMI MAE has no business relationship with entities of which the
general and limited partners of the Adviser to CRIIMI MAE are
officers, directors or equity owners other than as set forth in CRIIMI
MAE's 1995 Notice of Annual Meeting of Shareholders and Proxy
Statement to be filed with the Commission no later than April 30,
1995, which is incorporated herein by reference.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1 and 2. Financial Statements and Financial Statement Schedules
The following financial statements are incorporated herein by
reference in Item 8 from the indicated pages of the 1994 Annual Report
to Shareholders:
Page
Description Number(s)
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Consolidated Balance Sheets as of December 31,
1993 and 1994 57 through 58
Consolidated Statements of Income for the
years ended December 31, 1992, 1993 and 1994 59
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Consolidated Statements of Changes in
Shareholders' Equity for the years ended
December 31, 1992, 1993 and 1994 60
Consolidated Statements of Cash Flows for the
years ended December 31, 1992, 1993 and 1994 61
Notes to Consolidated Financial Statements 62 through 105
The report of CRIIMI MAE's independent accountants with respect to the above
listed consolidated financial statements appears on page 56 of the 1994 Annual
Report to Shareholders.
All other financial statements and financial statement schedules have been
omitted since the required information is included in the financial statements
or the notes thereto, or is not applicable or required.
(a) 3. Exhibits (listed according to the number assigned in the table in
Item 601 of Regulation S-K)
Exhibit No. 3 - Articles of incorporation and bylaws.
d. Articles of Incorporation of CRIIMI MAE Inc. (Incorporated
by reference from Exhibit 3(d) to the Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993).
e. Bylaws of CRIIMI MAE Inc. (Incorporated by reference from
Exhibit 3(e) to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
f. Agreement and Articles of Merger between CRIIMI MAE Inc. and
CRI Insured Mortgage Association, Inc. as filed with the
Office of the Secretary of the State of Delaware
(Incorporated by reference from Exhibit 3(f) to the
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993).
g. Agreement and Articles of Merger between CRIIMI MAE Inc. and
CRI Insured Mortgage Association, Inc. as filed with the
State Department of Assessment and Taxation for the State of
Maryland (Incorporated by reference from Exhibit 3(g) to the
Quarterly Report on Form 10-Q for the quarter ended June 30,
1993).
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Exhibit No. 4 - Instruments defining the rights of security holders,
including indentures.
a. $85,000,000 Credit Agreement, and the exhibits thereto,
dated as of October 23, 1991, between CRI Insured Mortgage
Association, Inc., Signet Bank/Virginia and Westpac Banking
Corporation (Incorporated by reference from Exhibit 4(g) to
the Annual Report on Form 10-K for 1991).
b. Collateral Pledge Agreement, and the exhibits thereto, dated
as of December 31, 1991, between CRI Insured Mortgage
Association, Inc., Signet Bank/Virginia, Westpac Banking
Corporation and Chemical Bank (Incorporated by reference
from Exhibit 4(h) to the Annual Report on Form 10-K for
1991).
c. Temporary Global Note, dated as of December 31, 1991, in the
aggregate amount of $19,190,625 issued by the registrant
(Incorporated by reference from Exhibit 4(i) to the Annual
Report on Form 10-K for 1991).
d. $100,000,000 Amended and Restated Credit Agreement, and the
exhibits thereto, dated as of October 23, 1991 and Amended
December 22, 1992, between CRI Insured Mortgage Association,
Inc., Signet Bank/Virginia and Westpac Banking Corporation
(Incorporated by reference from Exhibit 4(d) to the Annual
Report on Form 10-K for 1992).
e. Amended and Restated Collateral Pledge Agreement, and the
exhibits thereto, dated as of December 31, 1991 and amended
and restated as of December 29, 1992, between CRI Insured
Mortgage Association, Inc. and Chemical Bank (Incorporated
by reference from Exhibit 4(e) to the Annual Report on Form
10-K for 1992).
f. Amended and Restated Letter of Credit and Reimbursement
Agreement and the exhibits thereto, dated as of February 9,
1993 between CRI Funding Corporation, Canadian Imperial Bank
of Commerce New York Agency and National Australia Bank
Limited, New York Branch (Incorporated by reference from
Exhibit 4(f) to the Annual Report on Form 10-K for 1992).
g. Amended and Restated Guaranty, dated as of February 9, 1993
between CRI Insured Mortgage Association, Inc., Canadian
Imperial Bank of Commerce New York Agency and National
Australia Bank Limited, New York Branch (Incorporated by
reference from Exhibit 4(g) to the Annual Report on Form
10-K for 1992).
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h. Amended and Restated Loan Agreement and the exhibits
thereto, dated as of February 9, 1993 between CRI Insured
Mortgage Association, Inc. and CRI Funding Corporation
(Incorporated by reference from Exhibit 4(h) to the Annual
Report on Form 10-K for 1992).
i. Second Amended and Restated Security Agreement and the
exhibits thereto, dated as of February 9, 1993 between CRI
Insured Mortgage Association, Inc., Canadian Imperial Bank
of Commerce New York Agency and Chemical Bank (Incorporated
by reference from Exhibit 4(i) to the Annual Report on Form
10-K for 1992).
j. Committed Master Repurchase Agreement between Nomura
Securities International, Inc. and CRI Insured Mortgage
Association, Inc. dated April 30, 1993 (Incorporated by
reference from Exhibit 4(j) to the Quarterly Report on Form
10-Q for the quarter ended June 30, 1993).
k. Committed Master Repurchase Agreement Governing Purchases
and Sales of Participation Certificates between Nomura Asset
Capital Corporation and CRI Insured Mortgage Association,
Inc. dated April 30, 1993 (Incorporated by reference from
Exhibit 4(k) to the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1993).
l. Committed Master Repurchase Agreement between Nomura
Securities International, Inc. and CRIIMI MAE Inc. dated
November 30, 1993 (incorporated by reference from Exhibit
4(j) to the Annual Report on Form 10-K for the year ended
December 31, 1993).
m. Committed Master Repurchase Agreement Governing Purchases
and Sales of Participation Certificates between Nomura Asset
Capital Corporation and CRIIMI MAE Inc. dated November 30,
1993 (incorporated by reference from Exhibit 4(m) to the
Annual Report on Form 10-K for the year ended December 31,
1993).
n. Extension and Amendment Agreement between CRI Funding
Corporation, CRIIMI MAE Inc., Canadian Imperial Bank of
Commerce New York Agency, National Australia Bank Limited,
New York Branch, and The Fuji Bank, Ltd., New York Branch
dated January 25, 1994 (incorporated by reference from
Exhibit 4(n) to the Annual Report on Form 10-K for the year
ended December 31, 1993).
o. Settlement Agreement between Alex J. Meloy, Trustee of the
Harry Meloy Family Trust and
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Alan J. Hunken, Trustee of the Alan J. Hunken Retirement
Plan, individually and in their capacities as
representatives of certain plaintiff classes in ALEX J.
MELOY, ET AL., V. CRI LIQUIDATING REIT, INC., ET AL., and
(ii) CRI Liquidating REIT, Inc.; CRIIMI MAE Inc.; C.R.I.,
Inc.; William B. Dockser; Martin C. Schwartzberg, and
H. William Willoughby dated September 24, 1993 (incorporated
by reference from Exhibit 4(o) to the Annual Report on
Form 10-K for the year ended December 31, 1993).
p. Dividend Reinvestment and Stock Purchase Plan between CRIIMI
MAE Inc. and shareholders (incorporated by reference on the
registration statement on Form S-3 filed September 22,
1994).
q. Revolving Credit Agreement between CRIIMI MAE Inc. and each
of the financial institutions that are signatories thereto
and Canadian Imperial Bank of Commerce dated February 28,
1994 (filed herewith).
r. Amendment Agreement No. 1 to the Revolving Credit Agreement
among CRIIMI MAE Inc., CIBC Inc., National Australia Bank
Limited, Signet Bank, The Fuji Bank and Bank Hapoalim and
Canadian Imperial Bank of Commerce dated June 1, 1994
(filed herewith).
s. Amendment Agreement No. 2 to the Revolving Credit Agreement
among CRIIMI MAE Inc., CIBC Inc., National Australia Bank
Limited, Signet Bank, The Fuji Bank and Bank Hapoalim and
Canadian Imperial Bank of Commerce dated December 9, 1994
(filed herewith).
t. Amendment Terminating Intercreditor Agreement, dated as of
February 28, 1994 among Canadian Imperial Bank of Commerce,
National Australia Bank Limited, The Fuji Bank, Limited, CRI
Funding Corporation, Nomura Asset Capital Corporation,
Nomura Securities International, Signet Bank, Westpac
Banking Corporation by ASLK-CGER Bank (its assignee) and
CRIIMI MAE Inc.
u. Amendment to the Committed Master Repurchase Agreement among
Nomura Securities International, Inc., Nomura Asset Capital
Corporation and CRIIMI MAE Inc. dated December 12, 1994
(filed herewith).
v. Master Collateral Security and Netting Agreement dated as of
December 12, 1994 among Nomura Securities International,
Inc., Nomura Asset Capital Corporation, and CRIIMI MAE Inc.
(filed herewith).
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w. Letter Agreement among Nomura Securities International,
Inc., Nomura Asset Capital Corporation and CRIIMI MAE Inc.
dated as of December 20, 1994 (filed herewith).
x. Amendment to the Committed Master Repurchase Agreement among
Nomura Securities International, Inc., Nomura Asset Capital
Corporation and CRIIMI MAE Inc. dated January 19, 1995
(filed herewith).
y. Amendment to the Committed Master Repurchase Agreement by
and among Nomura Securities International, Inc., Nomura
Asset Capital Corporation and CRIIMI MAE Inc. dated January
24, 1995 (filed herewith).
z. First Amendment to Amended and Restated Credit Agreement
dated as of April 29, 1993 among CRIIMI MAE Inc., the Banks
listed on the signature pages thereto, and Signet Bank
(filed herewith).
aa. Second Amendment to Amended and Restated Credit Agreement
dated as of June 30, 1993 among CRIIMI MAE Inc., the Banks
listed on the signature pages thereto, and Signet Bank
(filed herewith).
bb. Third Amendment to Amended and Restated Credit Agreement
dated as of September 14, 1993 between CRIIMI MAE Inc., the
Banks listed on the signature pages thereto, and Signet Bank
(filed herewith).
cc. Assignment and Assumption Agreement dated as of September
17, 1993 among Westpac Banking Corporation, ASLK-CGER Bank,
CRIIMI MAE Inc. and Signet Bank (filed herewith).
dd. Fourth Amendment to Amended and Restated Credit Agreement
dated April 28, 1994 among CRIIMI MAE Inc., the Banks
listed on the signature pages thereto and Signet Bank
(filed herewith).
ee. Fifth Amendment to Amended and Restated Credit Agreement
dated December 9, 1994 among CRIIMI MAE Inc., the Banks
listed on the signature pages thereto and Signet Bank
(filed herewith).
ff. Repurchase Agreement on Mortgage Capital Funding, Inc.
Series 1994 - MC1 (tranche B-2) dated September 1, 1994
between CRIIMI MAE Inc. and Citibank, N.A. and/or Citicorp
Securities, Inc. (filed herewith).
gg. Repurchase Agreement on Mortgage Capital Funding, Inc.
Series 1994 - MC1 (tranche B-1) dated as of December 30,
1994 between CRIIMI MAE Inc. and Deutsche Bank Securities
Corporation (filed herewith).
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hh. Commitment Letter between CRIIMI MAE Inc. and German
American Capital Corporation dated January 19, 1995 (filed
herewith).
ii. Committed Master Repurchase Agreement Governing Purchases
and Sales of Participation Certificates between German
American Capital Corporation and CRIIMI MAE Inc. dated
January 23, 1995 (filed herewith).
jj. Committed Master Repurchase Agreement between German
American Capital Corporation and CRIIMI MAE Inc. dated
January 23, 1995 (filed herewith).
kk. Side letter to the Master Repurchase Agreement dated as of
January 23, 1995 between CRIIMI MAE Inc. and German American
Capital Corporation (filed herewith).
ll. Side letter to the Master Repurchase Agreement dated as of
January 27, 1995 between CRIIMI MAE Inc. and German American
Capital Corporation (filed herewith).
Exhibit No. 10 - Material contracts.
a. Revised Form of Advisory Agreement. (Incorporated by
reference from Exhibit No. 10.2 to the Registration
Statement).
Exhibit No. 13 - Annual Report to security holders, Form 10-Q or
Quarterly Report to security holders.
a. 1994 Annual Report to Shareholders.
Exhibit No. 21 - Subsidiaries of the registrant.
a. CRI Liquidating REIT, Inc., incorporated in the state of
Maryland.
b. CRIIMI, Inc., incorporated in the state of Maryland.
Exhibit No. 27 - Financial Data Schedule (filed herewith)
a. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
1994.
(c) Exhibits
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The list of Exhibits required by Item 601 of Regulation S-K is
included in Item (a)(3) above.
(d) Financial Statement Schedules
See Item (a) 1 and 2 above.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRIIMI MAE INC.
February 15, 1995 /s/ William B. Dockser
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DATE William B. Dockser
Chairman of the Board and
Principal Executive Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
February 15, 1995 /s/ William B. Dockser
- ------------------------- -------------------------
William B. Dockser
Chairman of the Board and
Principal Executive Officer
February 15, 1995 /s/ H. William Willoughby
- ------------------------- -------------------------
DATE H. William Willoughby
Director, President and
Secretary
February 15, 1995 /s/ Cynthia O. Azzara
- ------------------------- -------------------------
DATE Cynthia O. Azzara
Vice President, Chief Financial
Officer and Principal Accounting
Officer
February 15, 1995 /s/ Garrett G. Carlson, Sr.
- ------------------------- ---------------------------
DATE Garrett G. Carlson, Sr.
Director
February 15, 1995 /s/ G. Richard Dunnells
- ------------------------- -------------------------
DATE G. Richard Dunnells
Director
February 15, 1995 /s/ Robert F. Tardio
- ------------------------- -------------------------
DATE Robert F. Tardio
Director
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CROSS REFERENCE SHEET
The item numbers and captions in Parts I, II, III and IV hereof and the
page and/or pages in the referenced materials where the corresponding
information appears are as follows:
<TABLE>
<CAPTION>
Item Referenced Materials Page
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<S> <C> <C>
3. Legal Proceedings 1994 Annual Report 104 through 105
5. Market for the Registrant's 1994 Annual Report 22 through 23
Common Stock and Related
Stockholder Matters
6. Selected Financial Data 1994 Annual Report 21 through 22
7. Management's Discussion and 1994 Annual Report 24 through 55
Analysis of Financial
Condition and Results of
Operations
8. Financial Statements, 1994 Annual Report 56 through 61
including Auditors'
Report, and Supplementary
Data
11. Executive Compensation 1994 Annual Report 71 through 77
13. Certain Relationships and 1994 Annual Report 71 through 77
Related Transactions
</TABLE>
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EXHIBIT INDEX
Exhibit
- -------
(4)(q) Revolving Credit Agreement
(4)(r) Amendment 1 to the Revolving Credit Agreement
(4)(s) Amendment 2 to the Revolving Credit Agreement
(4)(t) Amendment Terminating Intercreditor Agreement
(4)(u) Amendment to the Committed Master Repurchase
Agreement
(4)(v) Master Collateral Security and Netting
Agreement
(4)(w) Letter Agreement as of December 20, 1994
(4)(x) Amendment to the Committed Master Repurchase
Agreement
(4)(y) Amendment to Commited Master Repurchase Agreement
(4)(z) First Amendment to Amended and Restated Credit Agreement
(4)(aa) Second Amendment to Amended and Restated Credit Agreement
(4)(bb) Third Amendment to Amended and Restated Credit Agreement
(4)(cc) Assignment and Assumption Agreement
(4)(dd) Fourth Amendment to Amended and Restated
Credit Agreement
(4)(ee) Fifth Amendment to Amended and Restated
Credit Agreement
(4)(ff) Repurchase Agreement on Mortgage Capital Funding, Inc.
Series 1994 - MC1 (tranche B-2)
(4)(gg) Repurchase Agreement on Mortgage Capital Funding, Inc.
Series 1994 - MC1 (tranche B-1)
(4)(hh) Commitment Letter
(4)(ii) Committed Master Repurchase Agreement Governing Purchases
and Sales of Participation Certificates
(4)(jj) Committed Master Repurchase Agreement
(4)(kk) Side Letter to Master Repurchase Agreement
(4)(ll) Side letter to the Master Repurchase Agreement
(27) Financial Data Schedule
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CRIIMI MAE INC.
ANNUAL REPORT TO SHAREHOLDERS
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21
CRIIMI MAE INC.
Selected Consolidated Financial Data
<TABLE>
<CAPTION>
For the years ended December 31,
1990 1991 1992 1993 1994
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share data)
TAX BASIS ACCOUNTING
Composition of dividends per share
for income tax purposes:
Ordinary income $ 0.82 $ 0.67 $ 0.75 $ 0.81 $ .72
Capital gains 0.26 0.41 0.33 0.31 .44
-------- -------- -------- -------- ---------
Total dividends per share $ 1.08 $ 1.08 $ 1.08 $ 1.12 $ 1.16
======== ======== ======== ======== =========
Tax basis income $ 22,276 $ 22,037 $ 21,626 $ 23,015 $ 29,606
======== ======== ======== ======== =========
Tax basis income per share $ 1.10 $ 1.09 $ 1.07 $ 1.14 $ 1.17
======== ======== ======== ======== =========
ACCOUNTING UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Statement of Income Data:
Income:
Mortgage investment income $ 50,039 $ 49,323 $ 45,931 $ 50,270 $ 68,019
Other income 4,991 4,995 4,771 6,180 3,423
-------- -------- -------- -------- ---------
Total income 55,030 54,318 50,702 56,450 71,442
-------- -------- -------- -------- ---------
Expenses:
Interest expense 22,346 25,791 24,392 28,008 39,245
Termination of interest rate swap -- -- -- 4,890 --
Other operating expenses 3,182 3,752 3,505 4,639 4,279
Fees to related party 2,544 2,325 2,238 2,715 3,761
Provision for settlement of litigation -- -- -- 1,500 (557)
-------- -------- -------- -------- ---------
Total expenses 28,072 31,868 30,135 41,752 46,728
-------- -------- -------- -------- ---------
Income before mortgage dispositions,
gain on sale of shares of
subsidiary, loss on investment
in limited partnership, non-
recurring merger costs and
minority interests 26,958 22,450 20,567 14,698 24,714
Net gains from mortgage dispositions 3,794 4,048 5,733 7,358 12,999
Gain on sale of shares of subsidiary -- -- -- 3,281 --
Loss on investment in limited
partnership -- -- (732) -- --
Minority interests (12,379) (10,855) (9,527) (9,580) (11,703)
-------- -------- -------- -------- --------
Income before extraordinary loss 18,373 15,643 16,041 15,757 26,010
Extraordinary loss from
extinguishment of debt -- (6,642) -- -- --
-------- -------- -------- -------- --------
Net income $ 18,373 $ 9,001 $ 16,041 $ 15,757 $ 26,010
======== ======== ======== ======== ========
Net income per share $ 0.91 $ 0.45 $ 0.79 $ 0.78 $ 1.07
======== ======== ======== ======== ========
Weighted average
shares outstanding 20,184 20,184 20,184 20,184 24,249
======== ======== ======== ======== ========
</TABLE>
<PAGE>
22
CRIIMI MAE INC.
<TABLE>
<CAPTION>
As of December 31,
1990 1991 1992 1993 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data: (In thousands)
Investment in mortgages (excludes
mortgages held for disposition) $546,448 $446,703 $448,319 $730,265(a) $857,589(a)
Total assets 602,786 546,054 526,667 808,701 955,050
Total debt 264,605 245,555 247,968 479,045 627,248
Shareholders' equity 211,195 198,397 193,109 215,289(a) 250,042(a)
<FN>
(a) Includes net unrealized gain on mortgage investments of CRI Liquidating of
approximately $29 million in 1993 and $10 million in 1994 due to the
implementation of Statement of Financial Accounting Standard No. 115.
</TABLE>
The selected consolidated statements of income data presented above for the
years ended December 31, 1992, 1993 and 1994, and the consolidated balance sheet
data as of December 31, 1993 and 1994, were derived from and are qualified by
reference to CRIIMI MAE's consolidated financial statements which have been
included elsewhere in this Annual Report to Shareholders. The consolidated
statements of income data for the years ended December 31, 1990 and 1991 and the
consolidated balance sheet data as of December 31, 1990, 1991 and 1992 were
derived from audited financial statements not included in this Annual Report to
Shareholders. This data should be read in conjunction with the consolidated
financial statements and the notes thereto.
MARKET DATA
On November 28, 1989, CRIIMI MAE was listed on the New York Stock Exchange
(Symbol CMM). Prior to that date, there was no public market for CRIIMI MAE's
shares. As of December 31, 1993 and 1994, there were 20,183,533 and 25,725,979,
respectively, shares held by approximately 23,000 and 23,900 investors,
respectively. The following table sets forth the high and low closing sales
prices and the dividends per share for CRIIMI MAE shares during the periods
indicated:
<PAGE>
23
CRIIMI MAE INC.
<TABLE>
<CAPTION>
1993
----------------------------------
Sales Price Dividends
Quarter Ended High Low per Share
------------- -------- ------- ---------
<S> <C> <C> <C>
March 31, $11 1/4 $ 9 7/8 $ .28
June 30, 11 5/8 10 3/4 .28
September 30, 12 3/8 11 1/4 .28
December 31, 12 5/8 11 .28
---------
$ 1.12
=========
<CAPTION>
1994
----------------------------------
Sales Price Dividends
Quarter Ended High Low per Share
------------- -------- ------- ---------
<S> <S> <S> <S>
March 31, $12 $ 9 3/8 $ .29
June 30, 11 1/8 9 3/4 .29
September 30, 11 1/4 9 3/8 .29
December 31, 9 1/2 6 5/8 .29
--------
$ 1.16
========
</TABLE>
<PAGE>
24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BACKGROUND
CRIIMI MAE Inc. (CRIIMI MAE) (formerly CRI Insured Mortgage Association,
Inc.), is an infinite-life, actively managed real estate investment trust
(REIT), which specializes in government insured and guaranteed mortgage
investments secured by multifamily housing complexes (Government Insured
Multifamily Mortgages) located throughout the United States. CRIIMI MAE's
principal objectives are to provide stable or growing quarterly cash
distributions to its shareholders while preserving and protecting its capital.
CRIIMI MAE has sought to achieve these objectives by investing in Government
Insured Multifamily Mortgages and, to a lesser degree, higher yielding uninsured
subordinated securities using a combination of debt and equity financing.
CRIIMI MAE and its subsidiary, CRI Liquidating REIT, Inc. (CRI Liquidating), are
Maryland corporations.
In addition to its portfolio of Government Insured Multifamily Mortgages
and other assets, CRIIMI MAE owns approximately 57% of the issued and
outstanding common stock of CRI Liquidating, a finite-life, self-liquidating
REIT which owns Government Insured Multifamily Mortgages. CRIIMI MAE and CRI
Liquidating were formed in 1989 to effect the merger into CRI Liquidating (the
CRIIMI Merger) of three federally insured mortgage funds sponsored by C.R.I.,
Inc. (CRI), a Delaware corporation formed in 1974: CRI Insured Mortgage
Investments Limited Partnership (CRIIMI I); CRI Insured Mortgage Investments II,
Inc. (CRIIMI II); and CRI Insured Mortgage Investments III Limited Partnership
(CRIIMI III; and, together with CRIIMI I and CRIIMI II, the CRIIMI Funds). The
CRIIMI Merger was effected to provide certain potential benefits to investors in
the CRIIMI Funds, including the elimination of unrelated business taxable income
for certain tax-exempt investors, the diversification of investments, the
reduction of general overhead and administrative costs as a percentage of assets
and total income and the simplification of tax reporting information. In the
CRIIMI Merger, which was approved by investors in each of the CRIIMI Funds and
subsequently consummated on November 27, 1989, investors in the CRIIMI Funds
received, at their option, shares of CRI Liquidating common stock or shares of
CRIIMI MAE common stock.
Investors in the CRIIMI Funds that received shares of CRIIMI MAE common
stock became shareholders in an infinite-life, actively managed REIT having the
potential to increase the size of its portfolio and enhance the returns to its
shareholders. CRIIMI MAE shareholders retained their economic interests in the
assets of the CRIIMI Funds which were transferred to CRI Liquidating through the
issuance of one CRI Liquidating share to CRIIMI MAE for each share of CRIIMI MAE
common stock issued to investors in the CRIIMI Merger. Upon the completion of
the CRIIMI Merger, CRIIMI MAE held a total of 20,361,807 CRI Liquidating shares,
or approximately 67% of the issued and outstanding CRI Liquidating shares.
Pursuant to a Registration Rights Agreement dated November 28, 1989 between
CRIIMI MAE and CRI Liquidating, CRIIMI MAE sold 3,162,500 of its CRI Liquidating
shares in an underwritten public
<PAGE>
25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
offering which was consummated in November 1993 reducing CRIIMI MAE's ownership
of CRI Liquidating to approximately 57%.
Investors in the CRIIMI Funds that received shares of CRI Liquidating
common stock, as well as CRIIMI MAE, became shareholders in a finite-life, self-
liquidating REIT, the assets of which consist primarily of Government Insured
Multifamily Mortgages and other assets formerly held by the CRIIMI Funds. CRI
Liquidating intends to hold, manage and dispose of its mortgage investments in
accordance with the objectives and policies of the CRIIMI Funds, including
disposing of any remaining mortgage investments by 1997 through an orderly
liquidation.
CRIIMI MAE and CRI Liquidating are governed by a board of directors, a
majority of whom are independent directors with extensive industry related
experience. The Board of Directors of CRIIMI MAE and CRI Liquidating have
engaged CRI Insured Mortgage Associates Adviser Limited Partnership (the
Adviser) to act in the capacity of adviser to CRIIMI MAE and CRI Liquidating.
The Adviser's general partner is CRI and its operations are conducted by CRI's
employees. CRIIMI MAE's and CRI Liquidating's executive officers are senior
executive officers of CRI. The Adviser manages CRIIMI MAE's portfolio of
Government Insured Multifamily Mortgages and other assets with the goal of
maximizing CRIIMI MAE's value, and conducts CRIIMI MAE's day-to-day operations.
Under an advisory agreement between CRIIMI MAE and the Adviser, the Adviser and
its affiliates receive certain fees and expense reimbursements.
CRIIMI MAE and CRI Liquidating have qualified and intend to continue to
qualify as REITs under Sections 856-860 of the Internal Revenue Code. As REITs,
CRIIMI MAE and CRI Liquidating do not pay taxes at the corporate level.
Qualification for treatment as REITs requires CRIIMI MAE and CRI Liquidating to
meet certain criteria, including certain requirements regarding the nature of
their ownership, assets, income and distributions of taxable income.
PROPOSAL TO BECOME SELF-MANAGED AND SELF-ADMINISTERED
CRIIMI MAE's board of directors has determined that it is in CRIIMI MAE's
best interest to consider a proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered REIT. As previously discussed,
CRIIMI MAE's portfolio management and day-to-day operations are currently
conducted by the Adviser, which is affiliated with CRI. CRI is owned by William
B. Dockser and H. William Willoughby, who are executive officers and directors
of CRIIMI MAE. CRIIMI MAE's board has formed a special committee comprised of
the independent directors to evaluate a proposed merger of CRI's Mortgage
Businesses, including the advisory business conducted on CRIIMI MAE's behalf and
certain other mortgage investment, servicing, origination and advisory
businesses which CRI currently conducts through various affiliates (CRI Mortgage
Businesses). The proposal calls for CRIIMI MAE to acquire the CRI Mortgage
Businesses, including CRICO Mortgage Company, Inc., (CRICO) and other
CRI-affiliates by:
<PAGE>
26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
- issuing common stock to CRI's owners, William B. Dockser and H.
William Willoughby, and certain other executive officers of CRIIMI
MAE, with the exact number of shares determined by dividing $21.4
million by the aggregate average of the high and low sales prices of
CRIIMI MAE's common stock over the 10 trading days preceding the
execution of a definitive merger agreement, provided that at the
closing of the transaction the stock issued cannot total more than
$22.9 million or more than 2,761,290 shares,
- assuming $9.1 million of outstanding debt of the CRI Mortgage
Businesses, and
- granting CRI's owners options valued at approximately $1.5 million to
purchase an additional three million shares of CRIIMI MAE common
stock. (Options for two million shares will vest pro rata over five
years and are exercisable at $1.50 per share over the average high and
low sales prices during the 10 trading days preceding the date of the
closing of this transaction. Options for one million shares will vest
pro rata over five years and are exercisable at $4.00 per share over
the same average high and low price.) The options expire eight years
after issuance.
The special committee of independent directors has engaged Merrill Lynch,
Pierce, Fenner & Smith Incorporated to act as CRIIMI MAE's financial advisor in
connection with the proposed merger and Duff & Phelps Capital Markets Co. to
render an opinion as to the fairness of the proposed merger to the stockholders
of CRIIMI MAE. The proposed merger is subject to a number of conditions,
including the negotiation of a definitive merger agreement, the delivery of a
fairness opinion by Duff & Phelps Capital Markets Co., final approval by the
special committee of independent directors and the approval of the holders of a
majority of CRIIMI MAE's common shares voted at a meeting where a quorum is
present.
If this transaction is approved by the special committee of independent
directors and the stockholders, all payments made by CRIIMI MAE under the
advisory agreement to the Adviser and to CRI would cease upon the consummation
of the transaction and CRIIMI MAE would no longer have a guaranteed $700,000
distribution from CRI/AIM Investment Limited Partnership. Although expense
reimbursements to CRI by CRIIMI MAE would no longer be made, CRIIMI MAE would
incur these expenses directly.
The proposed transaction has no impact on the payments required to be made
by CRI Liquidating, other than that the expense reimbursement currently paid by
CRI Liquidating to CRI in connection with the provision of services by its
Adviser will be paid to CRIIMI MAE subsequent to the consummation of the
transaction.
- - - - - - - - - - - - - - - - - - - - - - - - -
<PAGE>
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
In March 1994, CRIIMI MAE completed a public offering of an additional
5,000,000 shares of common stock at a price to the public of $11.25 per share
(the Equity Offering). The net proceeds of the Equity Offering totaled
approximately $52.2 million, which CRIIMI MAE used primarily to acquire
Government Insured Multifamily Mortgages. The costs of the Equity Offering,
including professional fees, filing fees, printing costs and other items,
approximated $.7 million. Additionally, underwriting fees in an amount which
approximated 6.0% of the gross offering proceeds were incurred.
On June 23, 1994, CRIIMI MAE filed with the SEC a Shelf Registration
Statement on Form S-3 (Commission File No. 33-54267) in order to register for
sale Debt Securities, Preferred Shares and Common Shares of CRIIMI MAE to the
public in the aggregate principal amount of up to $200 million. CRIIMI MAE may
from time to time offer in one or more series the securities in amounts, at
prices and on terms to be set forth in supplements to the registration
statement. On November 3, 1994, CRIIMI MAE sold 500,000 shares of common stock,
which were formerly held in treasury, under the shelf registration statement at
an offering price of $8.744 per share. Net offering proceeds of approximately
$4.3 million were invested in subordinated securities. Additionally, on January
13, 1995, CRIIMI MAE sold 625,000 shares of common stock under the shelf
registration statement at an offering price of $6.867 per share for net proceeds
of approximately $4.2 million. CRIIMI MAE intends to use the proceeds from this
sale of securities to acquire additional mortgage investments, sponsor and/or
participate in securitized mortgage programs, and to make other investments and
acquisitions relating to CRIIMI MAE's mortgage business.
Beginning in the third quarter of 1994, CRIIMI MAE implemented a dividend
reinvestment and stock purchase plan (the Plan) which allows shareholders who
elect to participate in the Plan (Participants) to purchase additional CRIIMI
MAE shares at a 2% discount through the reinvestment of CRIIMI MAE's dividends
and through optional cash payments. Common shares purchased under the Plan may
be, at CRIIMI MAE's option, newly issued common shares or common shares
purchased for Participants in the open market. The price of common shares
purchased from CRIIMI MAE with reinvested dividends will be 98% of the average
of the closing sales prices of the common shares as reported on the New York
Stock Exchange Composite Tape on the five trading days prior to the date on
which dividends are paid subject to any threshold price restrictions, as more
fully described in the Registration Statement on Form S-3 filed with the SEC
covering the shares to be issued under the Plan. The price to Participants of
common shares purchased in the open market with reinvested dividends will be 98%
of the average price of common shares purchased for the Plan by the Agent over
the period during which such common shares are purchased, exclusive of taxes and
commissions. CRIIMI MAE reserves the right to modify the pricing or any other
provision of the Plan at any time. Participants in the Plan may have cash
dividends on all or a portion of their common shares automatically reinvested.
Participants may terminate their accounts at any time in the manner
<PAGE>
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
provided for in the Plan. On December 30, 1994, 42,446 shares of stock were
issued under the Plan at a price of $6.6885 per share.
CRIIMI MAE INVESTMENTS
CRIIMI MAE invests in Government Insured Multifamily Mortgages and
subordinated securities collateralized by multifamily and commercial real
estate. CRIIMI MAE also holds the sole general partnership interests in four
publicly held limited partnerships and a limited partnership interest in the
advisor to those entities. The following is a summary of these investments at
December 31, 1994.
INVESTMENT IN MORTGAGES
As of December 31, 1993 and 1994, CRIIMI MAE directly owned 126 and 173
Government Insured Multifamily Mortgages and Government Insured Construction
Mortgages, respectively, which had a weighted average net effective interest
rate of approximately 8.22% and 8.00%, a weighted average remaining term of
approximately 34 years and 33 years, and a tax basis of approximately $499
million and $703 million, respectively.
As of December 31, 1993 and 1994, CRIIMI MAE indirectly owned through its
subsidiary, CRI Liquidating, 63 and 44 Government Insured Multifamily Mortgages,
respectively, which had a weighted average net effective interest rate of
approximately 9.97% and 10.02%, a weighted average remaining term of
approximately 27 years and 26 years, and a tax basis of approximately $173
million and $123 million, respectively.
Thus, on a consolidated basis, as of December 31, 1993 and 1994, CRIIMI MAE
owned, directly or indirectly, 189 and 217 Government Insured Multifamily
Mortgages and Government Insured Construction Mortgages, respectively. These
investments (including Mortgages Held for Disposition) had a weighted average
net effective interest rate of approximately 8.70%, a weighted average remaining
term of approximately 32 years and a tax basis of approximately $672 million, as
of December 31, 1993. These amounts compare to a weighted average net effective
interest rate of approximately 8.33%, a weighted average remaining term of
approximately 32 years and a tax basis of approximately $826 million, as of
December 31, 1994. In addition, as of December 31, 1994, CRIIMI MAE had
committed approximately $9.0 million for advances on FHA-Insured Loans relating
to the construction or rehabilitation of multifamily housing projects, including
nursing homes and intermediate care facilities (Government Insured Construction
Mortgages).
As discussed below, CRIIMI MAE makes direct investments in primarily two
categories of Government Insured Multifamily Mortgages at, near, or above par
value (Near Par or Premium Mortgage Investments).
FHA-Insured Investments--The first category of Near Par or Premium Mortgage
Investments in which CRIIMI MAE invests consists
<PAGE>
29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
of participation certificates evidencing a 100% undivided beneficial interest in
Government Insured Multifamily Mortgages insured by FHA pursuant to provisions
of the National Housing Act (FHA-Insured Loans). All of the FHA-Insured Loans
in which CRIIMI MAE invests are insured by HUD for effectively 99% of their
current face value. As part of its investment strategy, CRIIMI MAE also invests
in Government Insured Construction Mortgages which involve a two-tier financing
process in which a short-term loan covering construction costs is converted into
a permanent loan. CRIIMI MAE also becomes the holder of the permanent loan upon
conversion. The construction loan is funded in HUD-approved draws based upon
the progress of construction. The construction loans are GNMA-guaranteed or
insured by HUD. The construction loan generally does not amortize during the
construction period. Amortization begins upon conversion of the construction
loan into a permanent loan, which generally occurs within a 24-month period from
the initial endorsement by HUD. Approximately 31% of CRIIMI MAE's near par or
premium mortgage investments are FHA-Insured Loans or Government Insured
Construction Mortgages as of December 31, 1994.
Mortgage-Backed Securities--The second category of Near Par or Premium
Mortgage Investments in which CRIIMI MAE invests consists of federally
guaranteed mortgage-backed securities or other securities backed by Government
Insured Multifamily Mortgages issued by entities other than GNMA
(Mortgage-Backed Securities) and Mortgage-Backed Securities 100% guaranteed as
to principal and interest by GNMA (GNMA Mortgage-Backed Securities). As of
December 31, 1994, all of CRIIMI MAE's mortgage investments in this category
were GNMA Mortgage-Backed Securities. The GNMA Mortgage-Backed Securities in
which CRIIMI MAE invests are backed by Government Insured Multifamily Mortgages
insured in whole by HUD, or insured by HUD and a coinsured lender under HUD
mortgage insurance programs and the coinsurance provisions of the National
Housing Act. The Mortgage-Backed Securities in which CRIIMI MAE is permitted to
invest, although none have been acquired as of December 31, 1994, are backed by
Government Insured Multifamily Mortgages which are insured in whole by HUD under
HUD mortgage insurance programs. Approximately 69% of CRIIMI MAE's near par or
premium mortgage investments are GNMA Mortgage-Backed Securities as of December
31, 1994.
CRI Liquidating Mortgage Investments--CRI Liquidating's mortgage
investments consist solely of the Government Insured Multifamily Mortgages it
acquired from the CRIIMI Funds in the CRIIMI Merger. The CRIIMI Funds invested
primarily in Government Insured Multifamily Mortgages issued or sold pursuant to
programs of GNMA and FHA.
The majority of CRI Liquidating's mortgage investments were acquired by the
CRIIMI Funds at a discount to face value (Discount Mortgage Investments) on the
belief that based on economic, market, legal and other factors, such Discount
Mortgage Investments might be sold for cash, prepaid as a result of a conversion
to condominium housing or otherwise disposed of or refinanced in a manner
requiring prepayment or permitting other profitable
<PAGE>
30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
disposition three to twelve years after acquisition by the CRIIMI Funds.
Acquisitions--During 1994, CRIIMI MAE directly acquired 51 Government
Insured Multifamily Mortgages with an aggregate purchase price of approximately
$194 million with a weighted average net effective interest rate of
approximately 7.79% and a weighted average remaining term of approximately 32
years. In addition, during 1994, CRIIMI MAE funded advances of approximately
$41.8 million on Government Insured Construction Mortgages with a weighted
average net effective interest rate of approximately 8.22%. As previously
discussed, as of December 31, 1994, CRIIMI MAE had committed to make additional
advances on Government Insured Construction Mortgages, totalling approximately
$9.0 million.
Dispositions--Dispositions result from prepayments of, defaults on and
sales of Government Insured Multifamily Mortgages. Decreases in market interest
rates could result in the prepayment of certain mortgage investments. CRIIMI
MAE believes, however, that declining interest rates result in increased
prepayments of single-family mortgages to a greater extent than mortgages on
multifamily properties. This is partially due to lockouts (i.e. prepayment
prohibitions), prepayment penalties or difficulties in obtaining refinancing for
multifamily dwellings. However, based on current interest rates, CRIIMI MAE
does not expect to experience increased prepayment levels as compared to prior
years.
Decreases in occupancy levels, rental rates or value of any property
underlying a mortgage investment may result in the mortgagor being unable or
unwilling to make required payments on the mortgage and thereby defaulting. The
proceeds from the assignment (following a default) or prepayment of a Discount
Mortgage Investment are expected to exceed the amortized cost of the investment.
The proceeds from the assignment or prepayment of a Near Par or Premium Mortgage
Investment are expected to approximate the amortized cost of the investment.
On an amortized cost and tax basis, approximately 99% of CRIIMI MAE's
directly held mortgages are Near Par or Premium Mortgage Investments.
Therefore, the proceeds from a default or prepayment of any of CRIIMI MAE's
mortgage investments are expected to approximate the amortized cost and tax
basis of such mortgages.
On an amortized cost basis, as of December 31, 1994, approximately 89% of
CRI Liquidating's mortgages were Discount Mortgage Investments and approximately
11% were Near Par or Premium Mortgage Investments. On a tax basis, all of CRI
Liquidating's mortgages are Discount Mortgage Investments. Therefore, whether
by default or prepayment, the proceeds from the disposition of CRI Liquidating's
mortgage investments would, for the majority of such mortgages, be expected to
exceed the tax basis of such mortgages. However, on an amortized cost basis,
the proceeds from a default on, or prepayment of CRI Liquidating's Near Par or
Premium Mortgage Investments would be expected to approximate the amortized
cost.
<PAGE>
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
While it is not expected that CRIIMI MAE will sell any of its mortgage
investments, CRI Liquidating's business plan calls for an orderly liquidation of
its portfolio by 1997. Approximately 38%, 31% and 31%, respectively, of CRI
Liquidating's December 31, 1994 portfolio balance is expected to be liquidated
in 1995, 1996 and 1997. Therefore, to the extent mortgage investments are not
otherwise disposed of, CRI Liquidating intends to sell a substantial portion of
its portfolio as is necessary to effect its liquidation plan. On January 20,
1995, 21 mortgages were disposed of, with an aggregate amortized cost of
approximately $48.1 million, representing approximately 33% of the December 31,
1994 tax basis portfolio balance.
The following table sets forth certain information concerning dispositions
of Government Insured Multifamily Mortgages by CRIIMI MAE and CRI Liquidating
for the past three years:
<TABLE>
<CAPTION>
Net Gain/(Loss)
Recognized for Net Gain/(Loss)
Financial Recognized
Type of Dispositions Statement For Tax
Year Assignment(1) Sale Prepayment Total Purposes Purposes(3)
- ---- ------------- ---- ---------- ----- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1992-CRI Liq. 3 -- -- 3 $ 6,097,102 $ 11,202,237
CRIIMI MAE 4 -- -- 4 (363,957) (118,498)
1993-CRI Liq. 2 5 3 10 8,089,840 14,938,128
CRIIMI MAE 2 -- 5 7 (732,095) (650,339)
1994-CRI Liq. 3 14 2 19 12,553,280 18,354,125
CRIIMI MAE -- -- 7 7 446,028 646,223
--- --- --- --- ------------ ------------
14(2) 19 17 50 $ 26,090,198 $ 44,371,876
=== === === === ============ ============
<FN>
(1) CRIIMI MAE or CRI Liquidating may elect to receive insurance benefits in
the form of cash when a Government Insured Multifamily Mortgage defaults.
In that event, 90% of the face value of the mortgage generally is received
within approximately 90 days of assignment of the mortgage to HUD and 9% of
the face value of the mortgage is received upon final processing by HUD
which may not occur in the same year as assignment. If CRIIMI MAE or CRI
Liquidating elects to receive insurance benefits in the form of HUD
debentures, 99% of the face value of the mortgage is received upon final
processing by HUD. Gains from dispositions are recognized upon receipt of
funds or HUD debentures and losses generally are recognized at the time of
assignment.
(2) Five of the 14 assignments were sales of Government Insured Multifamily
Mortgages then in default and resulted in the CRIIMI Funds, CRI Liquidating
or CRIIMI MAE receiving near or above face value.
(3) In connection with the CRIIMI Merger, CRI Liquidating recorded its
investment in mortgages at the lower of cost or fair value, which resulted
in an overall net write down for tax purposes. For financial statement
purposes, carryover basis of accounting was used. Therefore, since the
CRIIMI Merger, the net gain for tax purposes was greater than the net gain
recognized for financial statement purposes. As a REIT, dividends to
shareholders are based on tax basis income.
</TABLE>
INVESTMENT IN SUBORDINATED SECURITIES
In addition to investing in Government Insured Multifamily Mortgages,
CRIIMI MAE's board of directors has authorized CRIIMI MAE to invest up to 20% of
CRIIMI MAE's total consolidated assets in other mortgage investments which are
not federally insured or guaranteed. Since adoption of this policy, CRIIMI MAE
and its Adviser have been reviewing opportunities for investment in other real
estate securities which complement CRIIMI MAE's existing holdings. In the
current investment climate, CRIIMI MAE's Adviser believes that well-researched
investments in high yielding subordinated securities represent attractive
investment opportunities. Such new investments are expected to enhance CRIIMI
<PAGE>
32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
MAE's projected dividend by diversifying its asset base with the addition of
higher-yielding/higher risk assets.
As of December 31, 1994, CRIIMI MAE had purchased three tranches of
securities issued by Mortgage Capital Funding, Inc. Series 1994-MC1 (MC-1) and
two tranches of securities issued by Mortgage Capital Funding, Inc. Series 1993-
C1 (C-1). Both MC-1 and C-1 issued multiple layers of securities and have
elected to be treated as real estate mortgage investment conduits (REMICs).
The following table summarizes information related to these investments:
<TABLE>
<CAPTION>
Original Amortized
Face Purchase Cost Anticipated
Pool Tranche Amount Price (as of December 31, 1994) Yield to Maturity (1)
- ----------- -------------- ------------ ----------- ------------------------- --------------------
<S> <C> <C> <C> <C> <C>
MC-1 B-1 (BB Rated) $12,041,520 $ 9,693,424 $ 9,702,113 12.5%
B-2 (B Rated) 10,321,303 7,708,723 7,770,361 13.6%
B-3 (Unrated) 12,041,520 4,635,985 4,542,208 18.1%
----------- ----------- -----------
Subtotal 34,404,343 22,038,132 22,014,682
----------- ----------- -----------
C-1 D (BB Rated) 10,596,316 9,430,721 9,447,186 12.8%
E (B Rated) 9,082,557 7,379,578 7,396,481 14.8%
----------- ----------- -----------
Subtotal 19,678,873 16,810,299 16,843,667
----------- ----------- -----------
Total $54,083,216 $38,848,431 $38,858,349
=========== =========== ===========
<FN>
(1) The accounting treatment required under generally accepted accounting
principles requires that the income on these investments be recorded on a
level yield basis given the anticipated yield to maturity on these
investments. This currently results in income which is lower for financial
statement purposes than for tax purposes. CRIIMI MAE anticipates the tax
basis return on these investments will approximate 30% during 1995. This
return was determined based on projected cash basis interest income,
assuming no defaults or unrecoverable losses, net of interest expense
attributable to the financing of the BB rated and B rated tranches, as
discussed below, and adjusted for amortization of original issue discount
related to these securities.
</TABLE>
At closing, MC-1 consisted of securities having a face value of
approximately $172 million. The collateral for the securities consisted of
uninsured mortgages with an unpaid principal balance (UPB) of approximately $172
million - 30 multifamily loans representing 72% of the UPB of the pool and 14
commercial loans representing 28% of the UPB of the pool. The composition of
the pool as of December 31, 1994 was substantially the same.
At closing, C-1 consisted of securities having a face value of
approximately $151 million. The collateral for the securities consisted of
uninsured mortgages with a UPB of approximately $151 million - 29 multifamily
loans representing 47% of the UPB of the pool and 32 commercial loans
representing 53% of the UPB of the pool. The composition of the pool as of
December 31, 1994 was approximately 39% multifamily and 62% commercial due to
prepayments of mortgages in the pool.
<PAGE>
33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
The REMICs allocate the cash flow from the underlying mortgages to the
securitized tranches, with the investment grade or higher rated tranches having
a priority right to the cash flow until their investment returns are met. Then,
any remaining cash flow is allocated among the other tranches in order of their
relative seniority. To the extent there are defaults and unrecoverable losses
on the underlying mortgages, resulting in reduced cash flows, the unrated
tranche will bear this loss first. To the extent there are losses in excess of
the unrated tranche's stated right to principal and interest, then the most
subordinated rated tranches will begin absorbing losses.
During the third and fourth quarters of 1994, CRIIMI MAE entered into a
series of repurchase agreements which provided CRIIMI MAE financing to purchase
the four rated tranches of the subordinated securities. Between 70% and 80% of
the purchase price was financed for aggregate borrowings of approximately $24.9
million. Under the agreements, the interest rate is based upon the then current
one-month or six-month LIBOR, as applicable, plus 1.0% to 1.25% depending on the
specific repurchase agreement. The table under "Other Repurchase Agreements"
describes more fully the terms of the financing.
In making these investments, CRIIMI MAE's Adviser and its affiliates
applied their knowledge of multifamily and commercial mortgages to perform due
diligence on the mortgage investments collateralizing the securities. This
analysis included reviewing the operating records of the underlying real estate
assets, reviewing appraisals, environmental studies, market studies,
architectural and engineering reviews, and reviewing, and where deemed
necessary, independently developing projected operating budgets. In addition,
site visits were conducted at substantially all of the properties, in an effort
to confirm market and architectural and engineering reviews.
CRIIMI MAE will generally make investments of this type when satisfactory
arrangements exist whereby CRIIMI MAE can closely monitor the collateral of the
pool. In this case, CRICO, an affiliate of the Adviser, will service the
majority of the mortgage investments comprising the pools, thereby enabling
CRICO to continuously monitor the performance of the pool, while actively
pursuing resolution of any delinquencies that may develop and maintaining
current records on the properties' operations and tax and insurance liabilities.
Additionally, CRICO is the special servicer for both pools which places it
directly in the position of asset manager in the event that a default occurs.
As special servicer, CRICO will use its efforts to create a financial solution
designed to maximize the benefit to all of the investors in the portfolio,
including CRIIMI MAE.
The anticipated returns on these investments are based upon a number of
assumptions that are currently subject to several business and economic
uncertainties and contingencies, including, without limitation, the lack of a
secondary market for these securities, prevailing interest rates, the general
condition of the real estate market, competition for tenants, and changes in
market
<PAGE>
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
rental rates. As these uncertainties and contingencies are generally beyond
CRIIMI MAE's control, no assurance can be given that the anticipated tax basis
return for the next year or the anticipated yield to maturity will be achieved.
Although investments in Government Insured Multifamily Mortgages and
government insured or guaranteed multifamily construction loans will continue to
comprise the majority of CRIIMI MAE's total consolidated asset base, CRIIMI MAE
expects that investments similar to the REMIC tranches discussed above will
represent a major component of CRIIMI MAE's new business activity during 1995.
As of December 31, 1994, these investments represent approximately 4% of CRIIMI
MAE's total consolidated assets. Investments of this type are not anticipated
to exceed 10% of CRIIMI MAE's total consolidated asset base through 1995.
INVESTMENT IN INSURED MORTGAGE FUNDS AND ADVISORY PARTNERSHIP
On September 6, 1991, CRIIMI MAE, through its wholly owned subsidiary
CRIIMI, Inc., acquired from Integrated Resources, Inc. (Integrated) all of the
general partnership interests in four publicly held limited partnerships known
as the American Insured Mortgage Investors Funds (the AIM Funds). The AIM Funds
own mortgage investments which are substantially similar to those owned by
CRIIMI MAE and CRI Liquidating. CRIIMI, Inc. receives the general partner's
share of income, loss and distributions (which ranges among the AIM Funds from
2.9% to 4.9%) from each of the AIM Funds. In addition, CRIIMI MAE owns
indirectly a limited partnership interest in the adviser to the AIM Funds in
respect of which CRIIMI MAE receives a guaranteed return each year.
LIQUIDITY
CRIIMI MAE and CRI Liquidating closely monitor their cash flow and
liquidity positions, including compliance with debt covenants, in an effort to
ensure that sufficient cash is available for operations and debt service
requirements and to continue to qualify as REITs. CRIIMI MAE's cash receipts,
which have been derived from scheduled payments of outstanding principal of and
interest on, and proceeds from dispositions of, mortgage investments plus cash
receipts from interest on temporary investments, borrowings, cash received from
the AIM Funds and advisory partnership, were sufficient for the years 1992, 1993
and 1994 to meet operating, investing and financing cash requirements. It is
anticipated that cash receipts will be sufficient to meet operating, investing
and financing cash requirements in future years. Cash flow was also sufficient
to provide for the payment of dividends to shareholders and to meet the IRS
requirements to continue to qualify as a REIT. As of December 31, 1994, there
were no significant commitments for capital expenditures; however, as of such
date, CRIIMI MAE had committed to fund additional Government Insured
Construction Mortgages totaling approximately $9.0 million. As discussed under
"Corporate Borrowings", CRIIMI MAE, in January 1995, paid down $126 million on
the borrowings under the Master Repurchase Agreements secured by FHA-Insured
Loans and $50 million on the Revolving Credit Facility. The borrowings were
replaced with substantially
<PAGE>
35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
similar financing provided by the German American Capital Corporation ("GACC").
Dividends -- During 1994, CRIIMI MAE increased its quarterly dividend to
$0.29 per share, or $1.16 per share for the year. During the four consecutive
quarters of 1993, CRIIMI MAE paid dividends of $0.28 per share. CRIIMI MAE's
objective is to pay a stable quarterly dividend and to increase the tax basis
income over time, and thereby increase the quarterly dividend. However, the
rise in short-term interest rates during the past year has significantly
increased CRIIMI MAE's interest expense which results in reduced net income and,
ultimately, dividend distributions. Management is currently developing
strategies which are expected to reduce the impact of higher interest expense
and, over time, improve the return to CRIIMI MAE's shareholders. In a letter to
stockholders dated October 25, 1994, CRIIMI MAE's management discussed CRIIMI
MAE's projected dividend for 1995. The letter explained that the projections
were based on assumptions which may differ significantly from actual events.
Since interest rates have increased significantly since October 1994, the
assumptions underlying the October 1994 projections are no longer valid and thus
reliance should not be placed on these projections. CRIIMI MAE's management is
in the process of finalizing its updated projections and expects to provide
stockholders with an estimated 1995 dividend range in March of 1995.
Although the mortgage investments held by CRIIMI MAE and CRI Liquidating
yield a fixed monthly mortgage payment once purchased, the cash dividends paid
by CRIIMI MAE and by CRI Liquidating will vary during each period due to several
factors. The factors which impact CRIIMI MAE's dividend include (i) the
distributions which CRIIMI MAE receives on its CRI Liquidating shares, (ii) the
level of income earned on CRIIMI MAE's mortgage investments depending on
prepayments, defaults, etc. (iii) the level of income earned on investments in
subordinated securities which vary depending on prepayments, defaults, etc. (iv)
the fluctuating yields on short-term debt and the rate at which CRIIMI MAE's
London Interbank Offered Rate (LIBOR) based debt is priced, (v) the fluctuating
yields in the short-term money market where the monthly mortgage payments
received are temporarily invested prior to the payment of quarterly dividends,
(vi) the yield at which principal from scheduled monthly mortgage payments,
mortgage dispositions and distributions from the AIM Funds and from CRI
Liquidating can be reinvested, (vii) variations in the cash flow received from
the AIM Funds, and (viii) changes in operating expenses.
The factors which impact CRI Liquidating's dividend include (i) gains or
losses on dispositions of CRI Liquidating's mortgage investments, (ii) the
reduction in the monthly mortgage payments due to mortgage dispositions, (iii)
changes in interest rates which impact the gain or loss from dispositions, (iv)
the fluctuating yields in the short-term money market where the monthly mortgage
payments received are temporarily invested prior to the payment of quarterly
dividends and (v) changes in operating expenses. Additionally, mortgage
dispositions may increase the return to the
<PAGE>
36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
shareholders for a period, although neither the timing nor the amount can be
predicted.
FINANCIAL FLEXIBILITY
Fluctuations in interest rates impact the value of CRIIMI MAE's mortgage
investments as well as the potential returns to shareholders through increased
cost of funds. Increases in long-term rates could decrease the value of
mortgage investments and, in certain circumstances, require CRIIMI MAE to pledge
additional collateral in connection with its borrowing facilities. This would
reduce CRIIMI MAE's borrowing capacity and, in certain circumstances, could
force CRIIMI MAE to liquidate a portion of its assets at a loss in order to
comply with certain covenants under its borrowing facilities. As of December
31, 1994, CRIIMI MAE had pledged mortgage investments with an aggregate fair
value of approximately $634.5 million as collateral for aggregate borrowings of
approximately $572 million under the Master Repurchase Agreements and the
Revolving Credit Facility. CRIIMI MAE also had pledged 13,124,000 shares of CRI
Liquidating stock with a fair value of approximately $59 million as collateral
for borrowings of approximately $30.4 million under the Bank Term Loan and
subordinated securities with an aggregate fair value of $33.8 million as
collateral for $24.9 million in borrowings under Other Repurchase Agreements.
(See further discussion under "Corporate Borrowings.")
The Adviser is actively monitoring the levels of unencumbered collateral
and is taking steps to negotiate more favorable collateral requirements with
lenders. Subsequent to year end, CRIIMI MAE executed a master repurchase
agreement with GACC for maximum borrowings of $300 million secured by FHA-
Insured Loans and GNMA Mortgage-Backed Securities valued at approximately 105%
of the amounts borrowed. This compares to requirements under the Master
Repurchase Agreements with Nomura Securities International, Inc. and Nomura
Asset Capital Corporation (collectively, Nomura) of 110% of the value on
borrowings secured by FHA-Insured loans and 105% or 107% on borrowings secured
by GNMA Mortgage-Backed Securities depending on whether the $350 million
facility or the $150 million facility was used and collateral requirements of
110% of the value on borrowings under the Revolving Credit Facility.
The collateral requirements on the Bank Term Loan are also anticipated to
be reduced when the refinancing is completed after the March 31, 1995 required
principal payment is made from the return of capital on the shares of CRI
Liquidating stock pledged as collateral under the Bank Term Loan. (For further
information, see discussion under "Bank Term Loan.") The value of the required
collateral is anticipated to be reduced from 200% of the outstanding borrowings
to 175% of the outstanding borrowings. The Adviser has also provided for more
flexibility through the availability of a $10 million working capital line of
credit, secured by shares of CRI Liquidating stock, expected to be closed in
February 1995. The Adviser is also exploring financing alternatives other than
secured lending of the type currently in place.
<PAGE>
37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
A reduction in long-term interest rates could have the impact of increasing
the value of CRIIMI MAE's mortgage investments, lowering collateral
requirements, and could also increase the level of prepayments on CRIIMI MAE's
mortgage investments. CRIIMI MAE's yield on mortgage investments will be
reduced to the extent CRIIMI MAE reinvests the proceeds from such prepayments in
new mortgage investments with effective rates which are below the rates of the
prepaid mortgages. Offsetting this risk is the opportunity to invest the
proceeds from a prepayment into other higher yielding mortgage investments such
as the subordinated securities.
As previously discussed, the Adviser is actively pursuing a new investment
program in subordinated securities which it believes is, overall, less interest
rate sensitive than existing insured mortgage investments. The Adviser also
believes that if the proposed merger of CRIIMI MAE with CRI's Mortgage
Businesses is approved (see discussion under "Proposal to Become Self-Managed
and Self-Administered"), CRIIMI MAE's overall return will be less interest rate
sensitive.
CRIIMI MAE has sought to enhance the return to its shareholders through the
use of leverage. Nevertheless, CRIIMI MAE's use of leverage carries with it the
risk that the cost of borrowings could increase without a corresponding increase
in the return on its mortgage investments, which could result in reduced net
income and thereby reduce the return to shareholders. To partially limit the
adverse effects of rising interest rates, CRIIMI MAE has entered into a series
of interest rate hedging agreements. (See "Interest Rate Hedge Agreements" for
a further discussion.) The Adviser continuously monitors CRIIMI MAE's
outstanding borrowings and hedging techniques in an effort to ensure that CRIIMI
MAE is making optimal use of its borrowing ability based on market conditions
and opportunities.
In 1991, the Adviser adopted a policy with respect to borrowings above and
beyond the original $140 million notes and $140 million Commercial Paper
Facility (Incremental Borrowings) which would result in a reduction in the
amount of fees payable by CRIIMI MAE if Net Positive Spreads (the difference
between the yield on mortgage investments purchased after those mortgages
purchased with the original $140 million notes and $140 million Commercial Paper
Facility and the cost of funds for all Incremental Borrowings including
associated operating costs on a tax basis) are not maintained: the total annual
fee and master servicing fee of 0.40% of invested assets payable to the Adviser
with respect to mortgage investments purchased after those mortgages acquired
with the proceeds of the original $140 million notes and $140 million Commercial
Paper Facility will be reduced incrementally if CRIIMI MAE's Net Positive Spread
on such debt falls below 0.40%. During 1994, the Net Positive Spread on the
Incremental Borrowings was in excess of 0.40%. Additionally, as required by
this policy, the mortgage selection fee will be eliminated upon reinvestment of
proceeds of mortgage dispositions where the mortgage investment was purchased
with borrowed funds and disposed of in less than five years without providing a
cumulative yield on the original mortgage
<PAGE>
38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
investment at disposition of at least 100 basis points higher than the original
yield at the date of purchase.
CORPORATE BORROWINGS
MASTER REPURCHASE AGREEMENTS
On April 30, 1993, CRIIMI MAE entered into master repurchase agreements,
(collectively, with the additional repurchase agreements described below, the
Master Repurchase Agreements) with Nomura which provided CRIIMI MAE with $350.0
million of available financing for a three-year term, expiring April 30, 1996.
Interest on such borrowings is based on the three-month LIBOR plus .75% or .50%
depending on whether FHA-Insured Loans or GNMA Mortgage-Backed Securities,
respectively, are pledged as collateral. The rate on the facility as of
December 31, 1994, including the applicable spreads, was 6.31% on the
borrowings secured by FHA-Insured Loans and 6.06% on the borrowings secured by
GNMA Mortgage-Backed Securities. The rates in effect on December 31, 1994 were
set on October 24, 1994 and reset on January 23, 1995 for three months at
6.875%, including the spread, for the borrowings secured by GNMA Mortgage-Backed
Securities. As discussed below, the borrowings secured by FHA-Insured Loans
were paid off on January 23, 1995 with proceeds from a new facility with GACC.
The value of the FHA-Insured Loans and the GNMA Mortgage-Backed Securities
pledged as collateral must equal at least 110% and 105%, respectively, of the
amounts borrowed. No more than 60% of the collateral pledged may be FHA-Insured
Loans and no less than 40% may be GNMA Mortgage-Backed Securities.
On November 30, 1993, CRIIMI MAE entered into additional repurchase
agreements with Nomura pursuant to which Nomura agreed to provide CRIIMI MAE
with an additional $150.0 million of available financing for a three-year term,
expiring October 27, 1996. Interest on such borrowings for the first twelve
months after the initial funding (April 1994 through April 1995) is based on the
three-month LIBOR plus .90% or .70% depending on whether FHA-Insured Loans or
GNMA Mortgage-Backed Securities, respectively, are pledged as collateral.
Interest on the borrowings from May 1995 to October 1995 and from November 1995
through the maturity of the facility will be based on three-month LIBOR plus
.50% and .30%, respectively, for borrowings secured by GNMA Mortgage Backed
Securities. (As discussed below, the borrowings secured by FHA-Insured Loans
were paid off on January 23, 1995 with proceeds from a new facility with GACC).
The rate on the facility as of December 31, 1994, including the applicable
spreads was 6.46% on the borrowings secured by FHA-Insured Loans and 6.26% on
borrowings secured by GNMA Mortgage-Backed Securities. The rates in effect on
December 31, 1994 were set on October 24, 1994 and reset on January 23, 1995
for three months at 7.075%, including the spread, for the borrowings secured by
GNMA Mortgage-Backed Securities. The value of the FHA-Insured Loans and the
GNMA Mortgage-Backed Securities pledged as collateral must equal at least 110%
<PAGE>
39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
and 107%, respectively, of the amounts borrowed. No more than 40% of the
collateral pledged may be FHA-Insured Loans and no less than 60% may be GNMA
Mortgage-Backed Securities. CRIIMI MAE was required to pay commitment fees of
three basis points per month on the unutilized amount through June 1994 and
twelve basis points on any remaining unused amounts as of July 1, 1994. For the
year ended December 31, 1994, CRIIMI MAE incurred approximately $415,000 in
commitment fees related to the $150.0 million facility.
As of December 31, 1994, CRIIMI MAE had borrowed approximately $457.0
million of the funds available under the Master Repurchase Agreements primarily
to acquire Government Insured Multifamily Mortgages and to repay a portion of
borrowings under the Commercial Paper Facility, as discussed below. As of
December 31, 1994, mortgage investments directly owned by CRIIMI MAE, which
approximate $499.1 million at fair value, were used as collateral pursuant to
certain terms of the Master Repurchase Agreements.
On January 23, 1995, approximately $126 million of borrowings
collateralized with FHA-Insured Loans were paid off, terminating the related FHA
portion of the Master Repurchase Agreements. Replacement financing was obtained
from GACC through a master repurchase agreement at substantially similar terms,
except as related to collateral requirements as discussed under "Financial
Flexibility".
COMMERCIAL PAPER FACILITY/REVOLVING CREDIT FACILITY
In the first quarter of 1994, borrowings under the Commercial Paper
Facility, which matured on February 28, 1994, were replaced with revolving
credit loans. During the period January 1, 1994 through February 28, 1994, the
maximum amount outstanding on these borrowings was approximately $95.3 million
and the weighted average amount outstanding was approximately $86.4 million.
The weighted average interest rate for the period January 1, 1994 through
February 28, 1994 on these borrowings was 5.3%, including all hedging and
borrowing costs.
In February 1993, CRIIMI MAE entered into an agreement to replace a $190.0
million letter of credit which provided the credit enhancement for the
Commercial Paper Facility and related revolving credit facility, with two
letters of credit in the amount of $35.0 million and $155.0 million provided by
National Australia Bank, Limited and Canadian Imperial Bank of Commerce (CIBC),
respectively. In April 1993, the letter of credit provided by CIBC was reduced
to $105.0 million. In January 1994, the special purpose corporation replaced
borrowings under the Commercial Paper Facility with revolving credit loans.
These revolving credit loans were originally scheduled to mature on January 28,
1994; however, the maturity date was extended until February 28, 1994.
As of February 28, 1994, these borrowings were replaced with a non-
amortizing revolving credit facility, maturing August 28, 1996 (the Revolving
Credit Facility) provided by certain lenders which had participated in the
Commercial Paper Facility. Under the Revolving Credit Facility, the lenders
agreed to loan CRIIMI MAE an
<PAGE>
40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
aggregate principal amount of $110 million. Effective August 5, 1994, an
additional $25 million was made available for borrowing by CRIIMI MAE under this
facility. CRIIMI MAE was required to pay commitment fees of twenty five basis
points per annum on the $25 million increase to the facility. As of December
31, 1994, CRIIMI MAE incurred approximately $33,000 of commitment fees related
to the $25 million increase in the facility.
The interest rate on borrowings under the Revolving Credit Facility is
based on CRIIMI MAE's choice of (i) the one, two, three or six-month LIBOR plus
an interest rate margin of .50%, .5625%, or .625% depending on the percentage of
GNMA Mortgage-Backed Securities pledged as collateral or (ii) a base rate equal
to the higher of either the lender's prime rate or .50% per annum above the
Federal Funds rate, plus an interest rate margin of 0%, .0625%, or .125%
depending on the percentage of GNMA Mortgage-Backed Securities held as
collateral. The rate on substantially all of this facility as of December 31,
1994 was 5.69%, which is based on 6 month LIBOR and a spread of .50%. This rate
was set on August 5, 1994 and reset on February 2, 1995 at 6.75%, which is based
on one month LIBOR and a spread of .625%.
The value of the collateral pledged must equal at least 110% of the amounts
borrowed. No more than 60% of the collateral pledged may be FHA-Insured Loans
and no less than 40% may be GNMA Mortgage-Backed Securities. As of December 31,
1994, mortgage investments directly owned by CRIIMI MAE, which approximated
$135.3 million at fair value, were used as collateral pursuant to the terms of
the Revolving Credit Facility.
The Revolving Credit Agreement also requires a minimum Fixed Charge
Coverage Ratio, as defined in the amended agreement, of 1.35 to 1.0 for any
fiscal quarter through September 30, 1995 and a minimum of 1.4 to 1.0 for any
fiscal quarter after September 30, 1995. For the quarter ended December 31,
1994, the Fixed Charge Coverage Ratio was 1.56:1.0.
As of December 31, 1994, CRIIMI MAE had used $115 million under the
Revolving Credit Facility primarily to acquire Government Insured Multifamily
Mortgages, other mortgage investments and to repay borrowings under the
aforementioned Commercial Paper Facility. On January 27, 1995, CRIIMI MAE made
a $50 million payment on the Revolving Credit Facility to effect a permanent,
required reduction in the amount available under the facility. Replacement
financing in the amount of $50 million was obtained from GACC at terms
substantially similar to those on the Master Repurchase Agreements.
MASTER REPURCHASE AGREEMENT WITH GACC
On January 23, 1995, CRIIMI MAE entered into a master repurchase agreement
with GACC which provided CRIIMI MAE with $300 million of available financing
through April 1, 1996. Interest on such borrowings is based on one month LIBOR
plus .75% or .50% depending on whether FHA-Insured Loans or GNMA Mortgage-Backed
<PAGE>
41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Securities, respectively, are pledged as collateral. Generally, the value of
the FHA-Insured Loans or GNMA Mortgage-Backed Securities pledged as collateral
must equal at least 105% of the amounts outstanding and no more than 60% of the
collateral pledged may be FHA-Insured Loans and no less than 40% may be GNMA
Mortgage-Backed Securities.
As previously discussed, approximately $176 million was borrowed from this
facility in January 1995 to paydown the portion of the borrowings secured by
FHA-Insured Loans under the Master Repurchase Agreements and to effect a $50
million required, permanent reduction in the Revolving Credit Facility. The
weighted average rate on these borrowings, including applicable spreads, was
6.70%.
BANK TERM LOAN
On October 23, 1991, CRIIMI MAE entered into a credit agreement with two
banks for a reducing term loan facility (the Bank Term Loan) in an aggregate
amount not to exceed $85.0 million, subject to certain terms and conditions. In
December 1992, the credit agreement was amended to increase the Bank Term Loan
by $15.0 million. The Bank Term Loan had an outstanding principal balance of
approximately $52.0 million and approximately $30.4 million as of December 31,
1993 and 1994, respectively. As of December 31, 1993 and 1994, the Bank Term
Loan was secured by the value of 13,874,000 and 13,124,000 CRI Liquidating
shares owned by CRIIMI MAE, respectively, based on a current requirement that
collateral valued at 200% of the outstanding balance secure the loan. The Bank
Term Loan requires a quarterly principal payment based on the greater of (i) the
return of capital portion of the dividend received by CRIIMI MAE on its CRI
Liquidating shares securing the Bank Term Loan or (ii) an amount to bring the
Bank Term Loan to its scheduled outstanding balance at the end of such quarter.
The current minimum amount of annual principal payments is approximately $15.8
million, with any remaining amounts of the original $85.0 million of principal
due in April 1996 and any remaining amounts of the $15.0 million of increased
principal due in December 1996.
The Bank Term Loan currently provides for an interest rate of 1.10% over
three-month LIBOR plus an agent fee of 0.05% per year. As of December 31, 1994,
the interest rate, including the applicable spreads was 7.666%. The rate will
reset on March 31, 1995.
CRIIMI MAE is in the process of refinancing the facility with one lender
with more favorable terms including an interest rate based on .75% over CRIIMI
MAE's choice of one, two or three month LIBOR and collateral requirements of
175% of the loan amount. This refinancing is anticipated to occur
simultaneously with the paydown of approximately $17.4 million which is expected
to be made in March 1995 from the return of capital from CRI Liquidating.
<PAGE>
42
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
OTHER REPURCHASE AGREEMENTS
CRIIMI MAE financed between 70% and 80% of the purchase price of the BB
rated and B rated tranches of subordinated securities which were purchased
during the third and fourth quarters of 1994. The following table summarizes
the financing related to these investments.
<TABLE>
<CAPTION>
Current
Rate
Amount % of Purchase Base (including
Pool Tranche Financed Price Financed Rate Spread Spread) Term
- ---- ------- ----------- -------------- -------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MC-1 B-1 $ 6,785,396 70% 1M LIBOR 125 7.25% 1 Month (1)
MC-1 B-2 5,396,106 70% 6M LIBOR 110 6.41% 6 Months(2)
C-1 D 7,544,577 80% 6M LIBOR 100 7.75% 6 Months(2)
C-1 E 5,165,704 70% 6M LIBOR 110 7.85% 6 Months(2)
-----------
$24,891,783
===========
<FN>
(1) Financing was replaced on January 30, 1995 in the amount of $7,754,739
representing 80% of the purchase price at an initial rate of 7.75% (6 month
LIBOR plus 100 basis points) with an initial term of six months with a
cancellation notification period of six months and several six month
renewals.
(2) These facilities have an initial term of six months, cancellation
notification periods ranging from six months to one year and with several
six month renewals.
</TABLE>
As a requirement under certain of CRIIMI MAE's other debt facilities, financings
related to repurchase agreements associated with the purchase of subordinated
securities are limited to no more than $50 million without the approval of the
lenders under the Master Repurchase Agreement, the Revolving Credit Agreement
and the GACC master repurchase agreement.
WORKING CAPITAL LINE OF CREDIT
CRIIMI MAE is in the process of finalizing a $10 million working capital
line of credit with Riggs National Bank. This line of credit will be secured by
shares of CRI Liquidating valued at approximately 175% of any outstanding
borrowings. At CRIIMI MAE's option, the interest rate will be set on
outstanding borrowings at one, two or three month LIBOR plus .60%, the daily
federal funds rate plus .80% or prime minus 1.0%.
Certain of the financial covenants under the line of credit will be
consistent with those of the other debt facilities discussed above.
OTHER DEBT RELATED INFORMATION
During December 1994, CRIIMI MAE negotiated with its lenders to amend debt
agreements to provide for more flexibility in the restrictive covenants. Under
all of CRIIMI MAE's existing debt facilities, as amended, except the Other
Repurchase Agreements, CRIIMI MAE's debt to equity ratio, as defined, may not
exceed 3.0:1.0. As of December 31, 1994, CRIIMI MAE's debt-to-equity ratio was
2.51:1.0. The weighted average cost of CRIIMI MAI's borrowings, including
amortization of deferred financing fees of $5.5 million, for the year ended
December 31, 1994, was approximately 7.01%.
<PAGE>
43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Certain of the debt agreements require that a minimum level of unencumbered
assets be maintained, the most restrictive of which requires 2% of total
indebtedness be maintained by CRIIMI MAE. As of January 24, 1995, CRIIMI MAE
had approximately $38 million, at management's estimated fair value, of
unencumbered FHA/GNMA Mortgage Investments. Additionally, CRIIMI MAE has other
unencumbered assets (which in some cases are subject to certain lender
eligibility requirements) including, but not limited to, cash, working capital
lines of credit and unencumbered CRI Liquidating stock.
<PAGE>
44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
INTEREST RATE HEDGE AGREEMENTS
To partially limit the adverse effects of rising interest rates, CRIIMI MAE
has entered into a series of interest rate hedging agreements with an aggregate
notional amount of approximately $709 million at December 31, 1994, as follows:
<TABLE>
<CAPTION>
Hedging Notional
Instrument Amount Effective Date Maturity Date Floor Cap Index(c)
- ---------------- -------------- -------------------- ----------------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Collar (e) $ 30,000,000 March 7, 1990 March 7, 1995 8.375% 10.125% CP
Collar (e) 20,000,000 March 30, 1990 March 30, 1995 8.375% 10.125% CP
Collar (e) 30,000,000 July 8, 1990 February 8, 1995 8.625% 10.625% CP
Accreting Collar(e) 35,000,000 July 9, 1990 July 9, 1995 8.750% 10.500% CP
Cap (b) 25,000,000 May 24, 1991 May 24, 1996 N/A 9.000% CP
Cap 25,000,000 June 17, 1991 June 17, 1996 N/A 8.450% CP
Cap (a) 50,000,000 June 25, 1993 June 25, 1998 N/A 6.50% 3M LIBOR
Cap (a) 50,000,000 July 1, 1993 June 3, 1996 N/A 6.50% 3M LIBOR
Cap (a) 50,000,000 July 20, 1993 July 20, 1998 N/A 6.25% 3M LIBOR
Cap (a) 50,000,000 August 10, 1993 August 10, 1997 N/A 6.00% 3M LIBOR
Cap (a) 50,000,000 August 27, 1993 August 27, 1997 N/A 6.125% 3M LIBOR
Cap (a) 50,000,000 November 10, 1993 November 10, 1997 N/A 6.00% 3M LIBOR
Cap (a) 35,000,000 February 2, 1994 February 2, 1999 N/A 6.125% 1M LIBOR
Cap (a) 50,000,000 March 15, 1994 March 15, 1997 N/A 6.375% 3M LIBOR
Cap (a) 50,000,000 March 25, 1994 March 25, 1998 N/A 6.50% 3M LIBOR
Cap (a) 50,000,000 October 7, 1994 October 7, 1997 N/A 6.75% 3M LIBOR
Cap (d) 33,385,131 December 31, 1991 March 31, 1996 N/A 6.50% 3M LIBOR
Cap (d) 6,451,291 January 15, 1993 March 29, 1996 N/A 6.50% 3M LIBOR
Cap (d) 18,614,868 December 31, 1991 March 31, 1996 N/A 10.50% 3M LIBOR
Cap (d) 1,048,709 March 31, 1993 December 31, 1996 N/A 10.50% 3M LIBOR
------------
$709,499,999
============
<FN>
(a) Approximately $4.5 million and $3.6 million of costs were incurred during
1993 and 1994, respectively, in connection with the establishment of
interest rate hedges. These costs are being amortized using the effective
interest method over the term of the interest rate hedge agreements for
financial statement purposes and in accordance with the regulations under
Internal Revenue Code Section 446 with respect to notional principal
contracts for tax purposes.
(b) On May 24, 1993, CRIIMI MAE and the counterparty to the collar, CIBC,
terminated the floor on this former collar. In consideration of such
termination, CRIIMI MAE paid CIBC approximately $2.3 million. This amount
was deferred on the accompanying consolidated balance sheets as the
underlying debt being hedged is still outstanding. This amount will be
amortized for the period from May 24, 1993 through May 26, 1996. CRIIMI
MAE amortized approximately $.5 million and $.8 million of this deferred
amount in the accompanying consolidated statements of income for the years
ended December 31, 1993 and 1994, respectively. Additionally, certain
costs incurred during 1991 in connection with an extinguishment of debt
which was financed with proceeds from a replacement facility, were deferred
and are being amortized using the effective interest method over the life
of the replacement facility. CRIIMI MAE amortized approximately $2.5
million and $1.6 million of such costs, during 1993 and 1994, respectively.
As of December 31, 1994, the unamortized balance of such costs was
approximately $630,000.
(c) The hedges are based either on the 30-day Commercial Paper Composite Index
(CP), three-month LIBOR, or one-month LIBOR.
(d) The notional amount of these hedges amortize based on the expected paydown
schedule of the Bank Term Loan. The average notional amount of these
hedges is expected to be $25,540,441, $3,383,118, $18,959,559 and
$2,710,633, respectively, during 1995.
(e) Total payments to the counterparty during 1993 and 1994 amounted to $8.2
million and $5.0 million, respectively, and were included in interest
expense in the accompanying consolidated statements of income.
</TABLE>
INTEREST RATE COLLARS
Interest rate collars are hedging instruments that provide protection
within a range of interest rates, based on a readily determinable interest rate
index. When the interest rate index exceeds the cap then the counterparty pays
the difference between the index and the cap to CRIIMI MAE. Alternatively, if
the interest rate index is below the floor then CRIIMI MAE pays the difference
to the counterparty.
<PAGE>
45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
As of December 31, 1994, CRIIMI MAE had in place interest rate collars
based on the Federal Reserve 30 day Commercial Paper Composite Rate ("CP Index")
with an aggregate notional amount of $115 million, a weighted average floor of
8.55% and a weighted average cap of 10.37%. During 1993 and 1994, the CP Index
was below the floor resulting in CRIIMI MAE making payments to the counterparty.
These interest rate collars expire between February 1995 and July 1995. During
October 1994, the Adviser purchased a three year cap in the notional amount of
$50 million to replace certain of the expiring collars.
INTEREST RATE CAPS
Interest rate caps provide protection to CRIIMI MAE to the extent interest
rates, based on a readily determinable interest rate index, increase above the
stated interest rate cap. As of December 31, 1994, CRIIMI MAE had in place
interest rate caps aggregating $594.5 million based on the CP Index and LIBOR.
The caps that are based on the CP Index have an aggregate notional amount of $50
million at December 31, 1994, with a weighted average cap of 8.70%. The cap
that is based on the one month LIBOR has a notional amount of $35 million and a
cap rate of 6.125%. Those based on the three month LIBOR, have an aggregate
notional amount of $510 million at December 31, 1994, with a weighted average
cap rate of 6.51%. At December 31, 1994 the three month LIBOR of 6.5% was at or
exceeded the cap rate on caps with a notional amount of $440 million. These
caps will reset during the first quarter of 1995 and if rates stay at that
level or increase, CRIIMI MAE will receive payments based on the difference
between three month LIBOR and the cap. During 1994, the interest rate indices
exceeded the interest rate cap on one cap which reset in December, which had the
result of reducing CRIIMI MAE's overall interest expense by approximately
$1,300.
CRIIMI MAE is exposed to credit loss in the event of nonperformance by the
counterparties to the interest rate hedge agreements should interest rates
exceed the caps. However, the Adviser does not anticipate nonperformance by any
of the counterparties, each of which has long-term debt ratings of A or above by
Standard and Poor's and A3 or above by Moody's.
Although CRIIMI MAE expects the overall average life of its mortgage
investments to exceed ten years, CRIIMI MAE's hedging agreements range in
initial maturity from 3 to 5 years, principally because of the high cost of
hedging instruments with maturities greater than 5 years. As of December 31,
1994, the average remaining term of these hedging agreements is approximately
2.2 years. Because CRIIMI MAE's mortgage investments have fixed interest rates,
upon expiration of CRIIMI MAE's collar and cap agreements, CRIIMI MAE will have
interest rate risk to the extent interest rates increase on its variable rate
borrowings unless the hedges are replaced. The Adviser continues to review its
debt and asset/liability hedging techniques in order to minimize the impact of
interest rate risk.
<PAGE>
46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
CASH FLOW--1994 VERSUS 1993
Net cash provided by operating activities increased for 1994 as compared to
1993 principally due to an increase in mortgage investment income, partially
offset by an increase in interest expense due primarily to mortgage acquisition
activity in 1994 funded by proceeds from financings. Also contributing to the
increase in net cash provided by operating activities was an increase in
interest payable as a result of the increase in debt incurred under financing
facilities during 1994. Partially offsetting the increase in net cash provided
by operating activities for 1994 was a decrease in accounts payable and accrued
expenses arising from the payment of costs incurred in connection with the
Equity Offering of common stock, and a decrease in short-term investment income,
as described below.
Net cash used in investing activities decreased for 1994 as compared to
1993. This decrease was principally due to the acquisition of Government
Insured Multifamily Mortgages and subordinated securities and advances on
Government Insured Construction Mortgages of approximately $274.6 million in
1994 as compared to $312.7 million in 1993. Also contributing to the decrease in
net cash used in investing activities was the receipt of net proceeds from the
sale of shares of subsidiary in 1993 of approximately $26.4 million.
Net cash provided by financing activities decreased for 1994 compared to
1993. This decrease was primarily due to the paydown of obligations incurred
under financing facilities of approximately $162.4 million during 1994 as
compared to $230.9 million during 1993. Also contributing to the decrease was a
reduction in proceeds from obligations incurred under financial facilities from
$462.3 million in 1993 to $310.6 million in 1994 and an increase in dividends
paid of $11.8 million from $53.7 million in 1993 to $65.5 million in 1994.
These decreases were partially offset by proceeds from share issuances of
approximately $56.8 million in 1994.
CASH FLOW--1993 VERSUS 1992
Net cash provided by operating activities increased for 1993 as compared to
1992 principally due to an increase in mortgage investment income partially
offset by an increase in interest expense due primarily to mortgage acquisition
activity in 1993 funded by proceeds from financings. Also contributing to the
increase in cash provided by operating activities was an increase in accounts
payable and accrued expenses attributable to the accrued costs incurred by
CRIIMI MAE with respect to its Equity Offering of common stock, as described
below in "Other Events." Partially offsetting the increase in net cash provided
by operating activities for 1993 was the payment of approximately $4.9 million
to terminate an interest rate swap agreement and an increase in interest expense
due primarily to mortgage acquisition activity in 1993 funded by proceeds from
financings.
Net cash used in investing activities increased for 1993 as compared to
1992. This increase was principally due to the
<PAGE>
47
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
acquisition of Government Insured Multifamily Mortgages and advances on
Government Insured Construction Mortgages of approximately $312.7 million in
1993 as compared to $31.8 million in 1992. Also contributing to the increase in
cash used in investing activities was the acquisition of other short-term
investments of approximately $175.3 million in 1993 as compared to approximately
$66.8 million in 1992. In addition, proceeds of approximately $6.1 million were
received during 1993 related to the sale of HUD debentures, as compared to the
receipt of proceeds of approximately $2.3 million during the same period in 1992
related to the redemption of HUD debentures. Partially offsetting the increase
in net cash used in investing activities was the receipt of approximately $167.1
million from the disposition of other short-term investments and proceeds from
mortgage dispositions of approximately $93.4 million in 1993 as compared to
approximately $65.5 million and $50.4 million, respectively, in 1992.
Net cash provided by financing activities increased for 1993 compared to
1992. This increase was primarily due to the receipt of net proceeds of
approximately $462.3 million from obligations incurred under financing
facilities, partially offset by payments on obligations incurred under financing
facilities.
RESULTS OF OPERATIONS
1994 VERSUS 1993
CRIIMI MAE earned approximately $29.6 million in tax basis income for the
year ended December 31, 1994, a 28.6% increase from approximately $23.0 million
for the year ended December 31, 1993. On a per share basis, tax basis income
for the year ended December 31, 1994 increased to approximately $1.17 per
weighted average share from approximately $1.14 per weighted average share for
the year ended December 31, 1993.
Net income for financial statement purposes was approximately $26.0 million
for the year ended December 31, 1994, a 65.1% increase from approximately $15.8
million for the year ended December 31, 1993. On a per share basis, financial
statement net income for the year ended December 31, 1994 increased to
approximately $1.07 per share from approximately $.78 per share for the year
ended December 31, 1993.
Total income increased approximately $15.0 million or 26.6% to
approximately $71.4 million for the year ended December 31, 1994 from
approximately $56.5 million for the year ended December 31, 1993. This increase
was primarily due to growth in mortgage investment income which CRIIMI MAE
experienced during 1993 and 1994, as described below.
Mortgage investment income increased approximately $16.8 million or 33.4%
to approximately $67.0 million for the year ended December 31, 1994 from
approximately $50.3 million for the year ended December 31, 1993. This increase
was principally due to an increase in mortgage investments, net of dispositions,
resulting from acquisitions of Government Insured Multifamily Mortgages and
<PAGE>
48
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
advances on Government Insured Construction Mortgages during 1993 and 1994,
which were principally funded by proceeds from the Master Repurchase Agreements
and the Equity Offering described above.
Income from investment in subordinated securities increased to
approximately $976,000 in 1994 as a result of the acquisition of these
securities during the year.
Other investment income decreased approximately $2.5 million or 69.5% to
approximately $1.1 million for the year ended December 31, 1994 from
approximately $3.6 million for the year ended December 31, 1993. This decrease
was primarily attributable to other investment income earned in 1993 on
approximately $175 million in other short-term investments acquired by CRIIMI
MAE and CRI Liquidating during the year ended December 31, 1993, all of which
were disposed of by December 31, 1993.
Total expenses increased approximately $5.0 million or 11.9% to
approximately $46.7 million for the year ended December 31, 1994 from
approximately $41.8 million for the year ended December 31, 1993. This increase
is principally due to increases in interest expense and annual and incentive
fees to related party, as described below. Partially offsetting this increase
was an adjustment to the provision for settlement of litigation and a decrease
in general and administrative expenses, as discussed below.
Interest expense increased approximately $11.2 million or 40.1% to
approximately $39.2 million for the year ended December 31, 1994 from
approximately $28.0 million for the year ended December 31, 1993. This increase
was principally a result of additional amounts borrowed during 1993 and 1994
under CRIIMI MAE's financing facilities and an increase in short term interest
rates. This increase was partially offset by interest savings due to the
termination of the interest rate swap and the buyout of the floor on a $25
million notional amount collar during 1993.
Other operating expenses decreased approximately $6.3 million or 45.6% to
approximately $7.5 million for the year ended December 31, 1994 from
approximately $13.7 million for the year ended December 31, 1993. This variance
was primarily attributable to the expense related to the termination of an
interest rate swap in 1993. Also contributing to the decrease were decreases in
general and administrative expenses and an adjustment to the provision for
settlement of litigation, as discussed below. Partially offsetting these
changes were increases in fees paid to related party and mortgage servicing
fees, as discussed below.
Total fees to related party, as presented on the consolidated statements of
income, are comprised of annual fees and incentive fees paid to the Adviser.
The Adviser receives annual fees for managing the portfolios of CRIIMI MAE and
CRI Liquidating. These fees include a base component equal to a percentage of
average invested assets. In addition, fees paid to the Adviser by CRI
Liquidating may include a performance-based component that is referred to as the
deferred component. The deferred component,
<PAGE>
49
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
which is also calculated as a percentage of average invested assets, is computed
each quarter but paid (and expensed) only upon meeting certain performance
goals. If these goals are not met, the deferred component accumulates and may
be paid in the future if cumulative goals are met. In addition, certain
incentive fees are paid by CRIIMI MAE and CRI Liquidating on a current basis if
certain performance goals are met.
Total fees to related party increased approximately $1.1 million or 38.5%
to approximately $3.8 million for the year ended December 31, 1994 from
approximately $2.7 million for the year ended December 31, 1993. This increase
was the result of increases in the CRIIMI MAE incentive and annual fees during
the year ended December 31, 1994, as discussed below. Annual fees increased
approximately $763,000 or 30.5% to approximately $3.3 million for the year ended
December 31, 1994 from approximately $2.5 million for the year ended December
31, 1993. This increase was primarily due to increased acquisitions of
mortgages and other mortgage investments and advances on Government Insured
Construction Mortgages. Partially offsetting this increase in annual fees for
the year ended December 31, 1994 as compared to the same period in 1993, was a
reduction in the base component of the annual fees payable by CRI Liquidating
resulting from mortgage dispositions during 1994 and 1993, as well as a
reduction in the base component of the CRI Liquidating annual fee from .25% to
.125% of average invested assets formerly held by CRIIMI III. Also offsetting
this increase in annual fees for this period was a reduction in the deferred
component of the CRI Liquidating annual fee.
The CRIIMI MAE incentive fee is equal to 25% of the amount by which net
income from additional mortgage investments exceeds the annual target return on
equity and is payable quarterly, subject to year-end adjustment. The incentive
fee increased approximately $284,000 or 132.6% to approximately $498,000 for the
year ended December 31, 1994 from approximately $214,000 for the year ended
December 31, 1993. This increase was primarily attributable to the increase in
CRIIMI MAE's net income from additional mortgage investments during the year
ended December 31, 1994 as a result of the increase in mortgage investment
income and the decrease in other operating expenses, as discussed above. Also
contributing to the increase was the recognition of a tax basis gain of
approximately $937,000 in connection with the prepayment of the mortgage on
Williamstown Apartments.
General and administrative expenses decreased approximately $501,000 or
13.2% to approximately $3.3 million in 1994 from approximately $3.8 million
1993. This decrease was primarily attributable to a decrease in professional
services as a result of the settlement of litigation, as discussed below.
Mortgage servicing fees increased approximately $151,000 or $30.9% to
approximately $641,000 in 1994 from approximately $490,000 in 1993. This
increase is attributable to the increase in mortgage acquisitions during 1993
and 1994.
<PAGE>
50
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Provision for settlement of litigation decreased approximately $2.0 million
or 133% in 1994 from $1.5 million in 1993. This decrease is attributable to an
adjustment in the number of warrants issued in connection with the settlement of
litigation, as discussed below in "Other Events."
Net gains or losses on mortgage dispositions are based on the number,
carrying amounts, and proceeds of mortgage investments disposed of during the
period. Net gains on mortgage dispositions increased approximately $5.6 million
or 76.7% to approximately $13.0 million in the year ended December 31, 1994 from
approximately $7.4 million in the year ended December 31, 1993. This increase
was primarily due to the sale of nineteen CRI Liquidating Government Insured
Multifamily Mortgages during 1994. These dispositions resulted in financial
statement gains of approximately $12.5 million and tax basis gains of
approximately $18.3 million. This compares to the disposition of ten CRI
Liquidating Government Insured Multifamily Mortgages during the year ended
December 31, 1993, that generated financial statement gains of approximately
$8.1 million and tax basis gains of approximately $14.9 million.
1993 VERSUS 1992
CRIIMI MAE earned approximately $23.0 million in tax basis income for 1993,
a 6.4% increase from approximately $21.6 million for 1992. On a per share
basis, tax basis income for 1993 increased to approximately $1.14 per share from
approximately $1.07 per share for 1992.
Net income for financial statement purposes was approximately $15.8 million
for 1993, a 1.8% decrease from approximately $16.0 million for 1992. On a per
share basis, financial statement net income for 1993 decreased to approximately
$0.78 per share from $0.79 per share for 1992.
Mortgage investment income increased $4.4 million or 9.4% to $50.3 million
for 1993 from $45.9 million for 1992. This increase was due principally to an
increase in mortgage investments, net of dispositions, resulting from
acquisitions and advances on Government Insured Construction Mortgages during
1993 which were funded principally by proceeds from the Master Repurchase
Agreements.
Other income increased $1.4 million or 30.0% to $6.2 million for 1993 from
$4.8 million for 1992. This increase was attributable primarily to approximately
$175 million in other short-term investments acquired by CRIIMI MAE and CRI
Liquidating during 1993, all of which were disposed of by December 31, 1993 as
compared to approximately $67 million in other short-term investments acquired
by CRI Liquidating during 1992, all of which were disposed of by December 31,
1992.
Total income increased $5.8 million or 11.3% to $56.5 million for 1993 from
$50.7 million for 1992. This increase was primarily
<PAGE>
51
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
due to the growth in mortgage investment income and other income during 1993.
Interest expense increased $3.6 million or 14.8% to $28.0 million for 1993
from $24.4 million for 1992. This increase was principally a result of greater
amounts borrowed during 1993 under the Master Repurchase Agreements entered into
in April 1993 which provided financing of $350 million, of which approximately
$331.7 million was outstanding as of December 31, 1993. This increase was
partially offset by a reduction in interest rates on CRIIMI MAE's borrowings for
1993 as compared to 1992.
In December 1993, CRIIMI MAE paid approximately $4.9 million to CIBC to
terminate an interest rate swap entered into on February 8, 1990 with a notional
amount of $25 million and a fixed rate of 9.23%. The termination of this swap
was effective December 1, 1993.
Other operating expenses increased $1.1 million or 32.4% to $4.6 million in
1993 from $3.5 million in 1992. This increase was attributable primarily to
legal fees incurred in connection with certain litigation as described below in
"Other Events." Also contributing to the increase in other operating expenses
was an increase in general and administrative expenses due primarily to
increased mortgage acquisition and disposition activities, the increase in costs
to produce CRIIMI MAE's 1992 Annual Report to Shareholders due to its increased
size and mailing costs, and the recognition of costs incurred in connection with
CRIIMI MAE's reincorporation as a Maryland corporation which was effective in
July 1993.
Fees to related party increased $0.5 million or 21.3% to $2.7 million for
1993 from $2.2 million for 1992. This increase was due primarily to an increase
in annual fees and incentive fees during 1993, as discussed below. Annual fees
increased $0.4 million or 20.6% to $2.5 million for 1993 from $2.1 million for
1992. This increase was primarily due to increased CRIIMI MAE mortgage assets,
including advances on Government Insured Construction Mortgages. Also
contributing to the increase for 1993 was the payment by CRI Liquidating in
1993, of the deferred component of the annual fee due to specific performance
goals being met, which included the payment of the deferred component for the
second half of 1992. Partially offsetting the increase in annual fees for 1993
was a reduction in the mortgage base, which is a component used in determining
the annual fees payable by CRI Liquidating. The mortgage base has been
decreasing as CRI Liquidating effects its business plan to liquidate by 1997.
The incentive fee increased approximately $50,000 or 30.6% to $0.2 million
for 1993 from $0.2 million for 1992. This increase was primarily attributable
to the fact that CRIIMI MAE's net income from additional mortgage investments
exceeded the annual target return on equity during both the second and third
quarters of 1993; accordingly, an incentive fee was paid during those quarters.
This compares to 1992 when CRIIMI MAE's net income from additional
<PAGE>
52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
mortgage investments exceeded the annual target return on equity only in the
third quarter.
During 1993, CRIIMI MAE recorded a provision of $1.5 million, including
$0.25 million paid in cash, in connection with the settlement of the litigation
described below in "Other Events."
Total expenses increased $11.7 million or 38.6% to $41.8 million for 1993
from $30.1 million for 1992. This increase was principally due to costs
incurred to terminate an interest rate swap, an increase in interest expense and
the recognition of a provision for settlement of litigation described below in
"Other Events."
Net gains on mortgage dispositions increased $1.7 million or 28.3% to $7.4
million in 1993 from $5.7 million in 1992. Gains on mortgage dispositions
increased $2.0 million or 32.7% to $8.1 million in 1993 from $6.1 million in
1992. This increase was primarily due to the disposition of 17 mortgages during
1993, 11 of which resulted in gains. This compares to the disposition of seven
mortgages during 1992, three of which resulted in gains. Losses on mortgage
dispositions increased $0.4 million or 98.4% to $0.8 million in 1993 from $0.4
million in 1992 due to the financial statement loss of $0.5 million recognized
in March 1993 as a result of the prepayment of the mortgage on Owings Manor
Apartments.
In November 1993, CRIIMI MAE recognized a financial statement gain of
approximately $3.3 million and a tax basis gain of approximately $4.9 million in
connection with the sale of 3,162,500 CRI Liquidating shares held by CRIIMI MAE.
REIT STATUS
CRIIMI MAE and CRI Liquidating have qualified and intend to continue to
qualify as REITs as defined in the Internal Revenue Code and, as such, will not
be taxed on that portion of their taxable income which is distributed to share-
holders provided that at least 95% of such taxable income is distributed.
CRIIMI MAE and CRI Liquidating intend to distribute substantially all of their
taxable income and, accordingly, no provision for income taxes has been made in
the accompanying consolidated financial statements. CRIIMI MAE and CRI
Liquidating, however, may be subject to tax at normal corporate rates on net
income or capital gains not distributed.
OTHER EVENTS
In connection with the settlement of certain class action litigation
involving CRIIMI MAE and certain of its affiliates, CRIIMI MAE entered into a
settlement agreement, which was approved by the Court on November 18, 1993,
providing, among other things, for the issuance of up to 2.5 million warrants,
exercisable for 18 months after issuance, to purchase shares of CRIIMI MAE
common stock at an exercise price of $13.17 per share (the Settlement
Agreement). The number of warrants to be issued was dependent on the number of
class members who submitted proof of claim forms by
<PAGE>
53
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
April 15, 1994. Based on the proofs of claim submitted as of such date, CRIIMI
MAE issued approximately 334,000 warrants pursuant to the Settlement Agreement.
In April 1994, CRIIMI MAE filed a Registration Statement on Form S-3 (Commission
File No. 33-53031) to register up to 375,000 shares of CRIIMI MAE's common
stock, issuable upon the exercise of the warrants of CRIIMI MAE.
Based on the Adviser's initial estimate of the number of warrants to be
issued, CRIIMI MAE accrued a total provision of $1.5 million (which included the
uninsured portion of a cash payment of $250,000 made in connection with the
Settlement Agreement) in its consolidated statement of income for the year ended
December 31, 1993. Because the actual number of warrants issued pursuant to the
Settlement Agreement was significantly lower than the initial estimate, CRIIMI
MAE reduced this provision in June 1994 to approximately $950,000.
The exercise of the warrants will not result in a charge to CRIIMI MAE's
tax basis income. Further, the Adviser believes that the exercise of the
warrants will not have a material adverse effect on CRIIMI MAE's tax basis
income per share or annualized cash dividends per share because CRIIMI MAE will
invest the proceeds from any exercise of the warrants in accordance with its
investment policy to purchase Government Insured Multifamily Mortgages or other
authorized investments. However, in the case of a significant decline in the
yield on mortgage investments and a significant decrease in the net positive
spread which CRIIMI MAE could achieve on its borrowings, the exercise of the
warrants may have a dilutive effect on tax basis income per share and cash
dividends per share. Receipt of the proceeds from the exercise of the warrants
will increase CRIIMI MAE's shareholders' equity.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of CRIIMI MAE's consolidated financial
instruments are presented in accordance with generally accepted accounting
principles which define fair value as the amount at which a financial instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. These estimated fair values, however, do not
represent the liquidation value or the market value of CRIIMI MAE.
In connection with CRIIMI MAE's and CRI Liquidating's implementation of
Statement of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115) as of December 31, 1993,
CRIIMI MAE's Investment in Mortgages continues to be recorded at amortized cost;
however, CRI Liquidating's Investment in Mortgages, is recorded at fair value as
of December 31, 1994. The difference between the amortized cost and the fair
value of CRI Liquidating's Government Insured Multifamily Mortgages represents
the net unrealized gains on CRI Liquidating's Government Insured Multifamily
Mortgages. CRIIMI MAE's share of the net unrealized gains on CRI Liquidating's
Government Insured Multifamily Mortgages is reported as a separate component of
shareholders' equity as of December 31, 1994.
<PAGE>
54
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
<TABLE>
<CAPTION>
As of December 31, 1994
Amortized Fair
Cost Value
------------ ------------
<S> <C> <C>
ASSETS
Investment in mortgages,
accounted for at
amortized cost:
Near par or premium $698,226,137 $648,201,775
Discount 4,989,616 4,860,606
Investment in subordinated
securities, accounted for
at amortized cost 38,858,349 38,353,226
------------ ------------
Total $742,074,102 $691,415,607
------------ ------------
Investment in mortgages,
accounted for at fair
value:
Near par or premium $ 14,837,135 $ 14,957,572
Discount 121,283,765 139,416,004
------------ ------------
Total $136,120,900 $154,373,576
------------ ------------
LIABILITIES
Obligations incurred under
financing facilities:
Master Repurchase Agreements $456,984,347 $456,984,347
Revolving Credit Facility 115,000,000 115,000,000
Other Repurchase Agreements 24,891,783 24,891,783
Bank Term Loan 30,371,800 30,371,800
------------ ------------
Total $627,247,930 $627,247,930
------------ ------------
OFF BALANCE SHEET
Interest rate hedge
agreements-asset $ 6,053,163 $ 21,438,096
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
INVESTMENT IN MORTGAGES
The fair value of the Government Insured Multifamily Mortgages is based on
the average of the quoted market prices from three investment banking
institutions who trade these instruments as part of their day-to-day activities.
INVESTMENT IN SUBORDINATED SECURITIES
The fair value of the investments in subordinated securities is based on
the price obtained from an investment banking institution which trades
subordinated securities. Given the limited market for these securities, only
one quote was available.
<PAGE>
55
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
OBLIGATIONS INCURRED UNDER FINANCING FACILITIES
The carrying amount approximates fair value because the current rate on the
debt is reset quarterly based on market rates.
INTEREST RATE HEDGE AGREEMENTS
The fair value of interest rate hedge agreements (used to hedge CRIIMI
MAE's debt) is the estimated amount that CRIIMI MAE would receive to terminate
the agreements as of December 31, 1994, taking into account current interest
rates and the current creditworthiness of the counterparties. The amount was
determined based on the average of two quotes received from financial
institutions which enter into these types of transactions as part of their day-
to-day activities.
<PAGE>
56
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
CRIIMI MAE Inc.
We have audited the accompanying consolidated balance sheets of CRIIMI MAE
Inc. (CRIIMI MAE) and its Subsidiaries as of December 31, 1993 and 1994, and the
related consolidated statements of income, changes in shareholders' equity and
cash flows for the years ended December 31, 1992, 1993 and 1994. These
financial statements are the responsibility of CRIIMI MAE's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CRIIMI MAE and
its Subsidiaries as of December 31, 1993 and 1994, and the consolidated results
of their operations and their cash flows for the years ended December 31, 1992,
1993 and 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Washington, D.C.
February 7, 1995
<PAGE>
57
CRIIMI MAE INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1993 1994
------------ ------------
<S> <C> <C>
Assets:
Investment in mortgages, at amortized cost,
net of unamortized discount and premium
of $3,182,138, and $3,408,860, respectively
Near par or premium $495,846,514 $698,226,137
Discount 903,982 4,989,616
------------ ------------
Total 496,750,496 703,215,753
------------ ------------
Investment in mortgages, at fair value
Discount 227,192,792 139,416,004
Near par or premium 17,647,797 14,957,572
------------ ------------
Total 244,840,589 154,373,576
------------ ------------
Investment in subordinated securities,
at amortized cost -- 38,858,349
Investment in insured mortgage funds and
advisory partnership 30,907,157 29,923,240
Cash and cash equivalents 13,599,860 5,143,171
Receivables and other assets 8,036,819 9,097,080
Deferred financing costs, net of accumulated
amortization of $7,355,095 and $11,065,595,
respectively 9,745,974 8,632,333
Deferred costs, principally paid to related
parties, net of accumulated amortization of
$1,870,587 and $1,933,697, respectively 4,820,135 5,806,499
------------ ------------
Total assets $808,701,030 $955,050,001
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
58
CRIIMI MAE INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31,
1993 1994
------------ ------------
<S> <C> <C>
Liabilities:
Master Repurchase Agreements $331,712,648 $456,984,347
Revolving Credit Facility -- 115,000,000
Other Repurchase Agreements -- 24,891,783
Bank Term Loan 52,026,400 30,371,800
Commercial paper 95,306,000 --
Accounts payable and accrued expenses 3,391,411 1,497,290
Interest payable 2,575,979 6,645,676
------------ ------------
Total liabilities 485,012,438 635,390,896
------------ ------------
Minority interest in
consolidated subsidiary 108,399,813 69,617,184
------------ ------------
Commitments and contingencies
Shareholders' equity:
Preferred stock -- --
Common stock 211,848 262,272
Net unrealized gains on mortgage
investments 29,028,019 10,316,768
Additional paid-in capital 195,561,015 244,224,984
------------ ------------
224,800,882 254,804,024
Less treasury stock, at cost - 1,001,274
and 501,274 shares, respectively (9,512,103) (4,762,103)
------------ ------------
Total shareholders' equity 215,288,779 250,041,921
------------ ------------
Total liabilities and shareholders'
equity $808,701,030 $955,050,001
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
59
CRIIMI MAE INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
Income:
Mortgage investment income:
Coupon interest $ 44,685,263 $ 49,003,805 $ 66,161,668
Discount amortization 1,271,288 1,307,072 979,054
Premium accretion (25,603) (41,305) (97,380)
------------ ------------ ------------
45,930,948 50,269,572 67,043,342
Income from investment in
subordinated securities, including
discount amortization of $0, $0 and
$103,695, respectively -- -- 975,835
Other investment income 2,209,979 3,646,224 1,112,938
Income from investment in insured mortgage funds
and advisory partnership 1,959,979 2,490,854 2,358,717
Income (loss) from investment in limited partnerships 600,852 43,605 (49,032)
------------ ------------- ------------
50,701,758 56,450,255 71,441,800
------------ ------------- ------------
Expenses:
Interest expense 24,391,901 28,008,282 39,244,621
Termination of interest rate swap -- 4,890,234 --
Annual fee to related party 2,073,818 2,500,785 3,263,443
Incentive fee to related party 163,798 213,972 497,675
General and administrative 2,826,209 3,806,026 3,305,323
Provision for settlement of litigation -- 1,500,000 (557,340)
Amortization of deferred costs 374,591 343,407 332,837
Mortgage servicing fees 304,105 489,773 641,329
------------ ------------- ------------
30,134,422 41,752,479 46,727,888
------------ ------------- ------------
Income before mortgage dispositions, gain on
sale of shares of subsidiary and loss on
investment in limited partnership 20,567,336 14,697,776 24,713,912
Mortgage dispositions:
Gains 6,115,747 8,116,948 13,482,665
Losses (382,602) (759,203) (483,357)
Gain on sale of shares of subsidiary -- 3,281,750 --
Loss on investment in limited partnership (731,951) -- --
------------ ------------- ------------
Income before minority interests 25,568,530 25,337,271 37,713,220
Minority interests in net income of
consolidated subsidiary (9,527,299) (9,579,766) (11,703,101)
------------ ------------- ------------
Net income $ 16,041,231 $ 15,757,505 $ 26,010,119
============ ============= ============
Per share data:
Net income per share $ .79 $ .78 $ 1.07
============ ============= ============
Weighted average shares outstanding,
exclusive of shares held in treasury 20,183,533 20,183,533 24,249,403
============ ============= ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
60
CRIIMI MAE INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended December 31, 1992, 1993 and 1994
<TABLE>
<CAPTION>
Net
Unrealized
Gains on
Common Stock Mortgage Additional Total
Par Investments Paid-in Undistributed Treasury Shareholders'
Value of Subsidiary Capital Net Income Stock Equity
------------ ------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $ 211,848 $ -- $207,697,497 $ -- $(9,512,103) $198,397,242
Adjustment to minority
interests in consolidated
subsidiary for actual
shares issued -- -- 766,891 -- -- 766,891
Payment of dividends for
prior years -- -- (298,331) -- -- (298,331)
Net income -- -- -- 16,041,231 -- 16,041,231
Dividends of $0.79 per share -- -- -- (16,041,231) -- (16,041,231)
Return of capital of $0.29
per share -- -- (5,756,990) -- -- (5,756,990)
--------- ------------- ------------ ------------ ----------- ------------
Balance, December 31, 1992 211,848 -- 202,409,067 -- (9,512,103) 193,108,812
Net income -- -- -- 15,757,505 -- 15,757,505
Dividends of $0.78 per share -- -- (15,757,505) -- (15,757,505)
Return of capital of $0.34
per share -- -- (6,848,052) -- -- (6,848,052)
Net unrealized gains on
mortgage investments -- 29,028,019 -- -- -- 29,028,019
--------- ------------- ------------ ------------ ----------- ------------
Balance, December 31, 1993 211,848 29,028,019 195,561,015 -- (9,512,103) 215,288,779
Net income -- -- -- 26,010,119 -- 26,010,119
Dividends of $1.07 per weighted
average share -- -- -- (26,010,119) (26,010,119)
Return of capital of $.14
per weighted average share -- -- (3,347,781) -- -- (3,347,781)
Adjustment to net unrealized
gains on mortgage investments -- (18,711,251) -- -- -- (18,711,251)
Shares issued 50,424 -- 52,011,750 -- 4,750,000 56,812,174
--------- ------------- ------------ ------------ ----------- ------------
Balance, December 31, 1994 $ 262,272 $ 10,316,768 $244,224,984 $ -- $(4,762,103) $250,041,921
========= ============= ============ ============ =========== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
61
CRIIMI MAE INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 16,041,231 $ 15,757,505 $ 26,010,119
Adjustments to reconcile net income to net
cash provided by operating activities:
Amortization of deferred costs 374,591 343,407 332,837
Amortization of deferred financing costs and discount
on long-term debt 3,249,891 4,209,980 5,483,786
Amortization of deferred AIM acquisition costs 322,017 224,528 246,357
Mortgage discount amortization (1,271,288) (1,307,072) (979,054)
Subordinated securities discount amortization -- -- (103,695)
Mortgage premium accretion 25,603 41,305 97,380
Other short-term investment premium amortization 1,226,457 7,727,101 --
Gains on mortgage dispositions (6,115,747) (8,116,948) (13,482,665)
Losses on mortgage dispositions 382,602 759,203 483,357
Gain on sale of shares of subsidiary -- (3,281,750) --
Loss on investment in limited partnership 731,951 -- --
Equity in (earnings) loss from investment in limited partnerships (600,852) (43,605) 49,032
Interest received under the equity method of accounting but
treated as reduction of investment in limited partnerships 972,704 308,093 --
Other operating activities (69,086) -- --
Minority interest in earnings of consolidated subsidiary 9,527,299 9,579,766 11,703,101
Changes in assets and liabilities:
(Increase) decrease in receivables and other assets 1,011,754 (1,800,610) (1,362,585)
Increase (decrease) in accounts payable and
accrued expenses (1,632,057) 2,789,560 (1,894,121)
Increase in interest payable 318,023 1,576,692 4,069,697
------------ ------------ ------------
Net cash provided by operating activities 24,495,093 28,767,155 30,653,546
------------ ------------ ------------
Cash flows from investing activities:
Purchase of mortgages and advances on construction loans (31,823,117) (312,654,818) (235,758,541)
Purchase of subordinated securities -- -- (38,848,431)
Receipt of principal from subordinated securities -- -- 93,777
Proceeds from mortgage dispositions 50,425,606 93,437,842 94,436,841
Purchase of other short-term investments (66,751,139) (175,300,539) --
Proceeds from sale of other short-term investments 65,491,782 167,111,884 --
Net proceeds from sale of shares of subsidiary -- 26,431,250 --
Receipt of mortgage and other short-term investment
principal from scheduled payments 3,939,855 4,961,447 6,107,350
Receipt of principal from investment in insured
mortgage funds 585,567 13,108 737,560
Payment of deferred costs (including deferred
acquisition costs) (42,147) (2,653,930) (1,319,201)
Annual return from investment in limited partnerships 253,292 253,292 253,292
Proceeds from redemption/sale of HUD debentures 2,334,150 6,062,502 --
------------ ------------ ------------
Net cash provided by (used in) investing activities 24,413,849 (192,337,962) (174,297,353)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from obligations incurred under financing facilities 81,982,708 462,344,165 310,618,324
Principal payments on obligations incurred under financing
facilities (79,481,793) (230,859,621) (162,415,442)
Increase in deferred financing costs (328,029) (7,260,655) (4,370,145)
Dividends (including return of capital) paid to
shareholders, including minority interests (46,142,788) (53,653,356) (65,457,793)
Proceeds from the issuance of common stock -- -- 56,812,174
------------ ------------ ------------
Net cash (used in) provided by financing activities (43,969,902) 170,570,533 135,187,118
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 4,939,040 6,999,726 (8,456,689)
Cash and cash equivalents, beginning of year 1,661,094 6,600,134 13,599,860
------------ ------------ ------------
Cash and cash equivalents, end of year $ 6,600,134 $ 13,599,860 $ 5,143,171
============ ============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
<PAGE>
62
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
CRIIMI MAE Inc. (CRIIMI MAE) (formerly CRI Insured Mortgage Association,
Inc.), is an infinite-life, actively managed real estate investment trust
(REIT), which specializes in government insured and guaranteed mortgage
investments secured by multifamily housing complexes (Government Insured
Multifamily Mortgages) located throughout the United States. CRIIMI MAE's
principal objectives are to provide stable or growing quarterly cash
distributions to its shareholders while preserving and protecting its capital.
CRIIMI MAE has sought to achieve these objectives by investing in Government
Insured Multifamily Mortgages and, to a lesser degree, higher yielding uninsured
subordinated securities using a combination of debt and equity financing.
CRIIMI MAE and its subsidiary, CRI Liquidating REIT, Inc. (CRI Liquidating), are
Maryland corporations.
In addition to its portfolio of Government Insured Multifamily Mortgages
and other assets, CRIIMI MAE also owns approximately 57% of the issued and
outstanding common stock of CRI Liquidating, a finite-life, self-liquidating
REIT which owns Government Insured Multifamily Mortgages.
CRIIMI MAE and CRI Liquidating were formed in 1989 to effect the merger
into CRI Liquidating (the CRIIMI Merger) of three federally insured mortgage
funds sponsored by C.R.I., Inc. (CRI), a Delaware corporation formed in 1974:
CRI Insured Mortgage Investments Limited Partnership (CRIIMI I); CRI Insured
Mortgage Investments II, Inc. (CRIIMI II); and CRI Insured Mortgage Investments
III Limited Partnership (CRIIMI III; and, together with CRIIMI I and CRIIMI II,
the CRIIMI Funds). The CRIIMI Merger was effected to provide certain potential
benefits to investors in the CRIIMI Funds, including the elimination of
unrelated business taxable income for certain tax-exempt investors, the
diversification of investments, the reduction of general overhead and
administrative costs as a percentage of assets and total income and the
simplification of tax reporting information. In the CRIIMI Merger, which was
approved by investors in each of the CRIIMI Funds and subsequently consummated
on November 27, 1989, investors in the CRIIMI Funds received, at their option,
shares of CRI Liquidating common stock or shares of CRIIMI MAE common stock.
Investors in the CRIIMI Funds that received shares of CRIIMI MAE common
stock became shareholders in an infinite-life, actively managed REIT having the
potential to increase the size of its portfolio and enhance the returns to its
shareholders. CRIIMI MAE shareholders retained their economic interests in the
assets of the CRIIMI Funds which were transferred to CRI Liquidating through the
issuance of one CRI Liquidating share to CRIIMI MAE for each share of CRIIMI MAE
common stock issued to investors in the CRIIMI Merger. Upon the completion of
the CRIIMI Merger, CRIIMI MAE held a total of 20,361,807 CRI Liquidating shares,
or approximately 67% of the issued and outstanding CRI Liquidating shares.
<PAGE>
63
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization - Continued
Pursuant to a Registration Rights Agreement dated November 28, 1989 between
CRIIMI MAE and CRI Liquidating, CRIIMI MAE sold 3,162,500 of its CRI Liquidating
shares in an underwritten public offering which was consummated in November 1993
reducing CRIIMI MAE's ownership of CRI Liquidating to approximately 57%.
Investors in the CRIIMI Funds that received shares of CRI Liquidating
common stock, as well as CRIIMI MAE, became shareholders in a finite-life, self-
liquidating REIT, the assets of which consist primarily of Government Insured
Multifamily Mortgages and other assets formerly held by the CRIIMI Funds. CRI
Liquidating intends to hold, manage and dispose of its mortgage investments in
accordance with the objectives and policies of the CRIIMI Funds, including
disposing of any remaining mortgage investments by 1997 through an orderly
liquidation.
CRIIMI MAE and CRI Liquidating are governed by a board of directors, a
majority of whom are independent directors. The Board of Directors of CRIIMI
MAE and CRI Liquidating has engaged CRI Insured Mortgage Associates Adviser
Limited Partnership (the Adviser) to act in the capacity of adviser to CRIIMI
MAE and CRI Liquidating. The Adviser's general partner is CRI and its operations
are conducted by CRI's employees. CRIIMI MAE's and CRI Liquidating's executive
officers are senior executive officers of CRI. The Adviser manages CRIIMI MAE's
portfolio of Government Insured Multifamily Mortgages and other assets with the
goal of maximizing CRIIMI MAE's value, and conducts CRIIMI MAE's day-to-day
operations. Under an advisory agreement between CRIIMI MAE and the Adviser, the
Adviser and its affiliates receive certain fees and expense reimbursements.
CRIIMI MAE's board of directors has determined that it is in CRIIMI MAE's
best interest to consider a proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered REIT. As previously discussed,
CRIIMI MAE's portfolio management and day-to-day operations are currently
conducted by the Adviser, which is affiliated with CRI. CRI is owned by William
B. Dockser and H. William Willoughby, who are executive officers and directors
of CRIIMI MAE.
CRIIMI MAE's board has formed a special committee comprised of the
independent directors to evaluate a proposed merger of CRI's mortgage
businesses, including the advisory business conducted on CRIIMI MAE's behalf and
certain other mortgage investment, servicing, origination and advisory
businesses which CRI currently conducts through various affiliates (CRI Mortgage
Businesses). The proposal calls for CRIIMI MAE to acquire the CRI Mortgage
Businesses, including CRICO Mortgage Company, Inc. (CRICO) and other CRI-
affiliates by:
- issuing common stock to CRI's owners, William B. Dockser and H.
William Willoughby, and certain other executive officers of CRIIMI
MAE, with the exact number
<PAGE>
64
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization - Continued
of shares determined by dividing $21.4 million by the aggregate
average of the high and low sales prices of CRIIMI MAE's common stock
over the 10 trading days preceding the execution of a definitive
merger agreement, provided that at the closing of the transaction the
stock issued cannot total more than $22.9 million or more than
2,761,290 shares,
- assuming $9.1 million of outstanding debt of the CRI Mortgage
Businesses, and
- granting CRI's owners options valued at approximately $1.5 million to
purchase an additional three million shares of CRIIMI MAE common
stock. (Options for two million shares will vest pro rata over five
years and are exercisable at $1.50 per share over the average high and
low sales prices during the 10 trading days preceding the date of the
closing of this transaction. Options for one million shares will vest
pro rata over five years and are exercisable at $4.00 per share over
the same average high and low price.) The options expire eight years
after issuance.
The special committee of independent directors has engaged Merrill Lynch,
Pierce, Fenner & Smith Incorporated to act as CRIIMI MAE's financial advisor in
connection with the proposed merger and Duff & Phelps Capital Markets Co. to
render an opinion as to the fairness of the proposed merger to the stockholders
of CRIIMI MAE. The proposed merger is subject to a number of conditions,
including the negotiation of a definitive merger agreement, the delivery of a
fairness opinion by Duff & Phelps Capital Markets Co., final approval by the
special committee of independent directors and the approval of the holders of a
majority of CRIIMI MAE's common shares voted at a meeting where a quorum is
present.
On September 6, 1991, CRIIMI MAE, through its wholly owned subsidiary
CRIIMI, Inc., acquired from Integrated Resources, Inc. (Integrated) all of the
general partnership interests in four publicly held limited partnerships known
as the American Insured Mortgage Investors Funds (the AIM Funds). The AIM Funds
own mortgage investments which are substantially similar to those owned by
CRIIMI MAE and CRI Liquidating. CRIIMI, Inc. receives the general partner's
share of income, loss and distributions (which ranges among the AIM Funds from
2.9% to 4.9%) from each of the AIM Funds. In addition, CRIIMI MAE owns
indirectly a limited partnership interest in the adviser to the AIM Funds in
respect of which CRIIMI MAE receives a guaranteed return each year.
CRIIMI MAE and CRI Liquidating have qualified and intend to continue to
qualify as REITs under Sections 856-860 of the Internal Revenue Code. As REITs,
CRIIMI MAE and CRI Liquidating do not pay taxes at the corporate level.
Qualification for treatment as REITs requires CRIIMI MAE and CRI Liquidating to
<PAGE>
65
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization - Continued
meet certain criteria, including certain requirements regarding the nature of
their ownership, assets, income and distributions of taxable income.
Beginning in the third quarter of 1994, CRIIMI MAE implemented a dividend
reinvestment and stock purchase plan (the Plan) which allows shareholders who
elect to participate in the Plan (Participants) to purchase additional CRIIMI
MAE shares at a 2% discount through the reinvestment of CRIIMI MAE's dividends
and through optional cash payments. Common shares purchased under the Plan may
be, at CRIIMI MAE's option, newly issued common shares or common shares
purchased for Participants in the open market. The price of common shares
purchased from CRIIMI MAE with reinvested dividends will be 98% of the average
of the closing sales prices of the common shares as reported on the New York
Stock Exchange Composite Tape on the five trading days prior to the date on
which dividends are paid subject to any threshold price restrictions, as more
fully described in the Registration Statement on Form S-3 filed with the SEC
covering the shares to be issued under the Plan. The price to Participants of
common shares purchased in the open market with reinvested dividends will be 98%
of the average price of common shares purchased for the Plan by the Agent over
the period during which such common shares are purchased, exclusive of taxes and
commissions. CRIIMI MAE reserves the right to modify the pricing or any other
provision of the Plan at any time. Participants in the Plan may have cash
dividends on all or a portion of their common shares automatically reinvested.
Participants may terminate their accounts at any time in the manner provided for
in the Plan.
2. Summary of Significant Accounting Policies
METHOD OF ACCOUNTING
The consolidated financial statements of CRIIMI MAE are prepared on
the accrual basis of accounting in accordance with generally accepted
accounting principles.
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements as of
December 31, 1993 and for the years ended December 31, 1992 and 1993 have
been reclassified to conform with the 1994 presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of money market funds, time and
demand deposits and repurchase agreements with original maturities of three
months or less.
<PAGE>
66
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies - Continued
CONSOLIDATION AND MINORITY INTERESTS
The consolidated financial statements reflect the financial position,
results of operations, and cash flows of CRIIMI MAE, CRI Liquidating, and
CRIIMI, Inc., for all periods presented. All intercompany accounts and
transactions have been eliminated in consolidation.
Since CRIIMI MAE owned approximately 67%, 57% and 57% of CRI
Liquidating as of December 31, 1992, 1993 and 1994, respectively, the
ownership interests of the other shareholders in the equity and net income
of CRI Liquidating are reflected as minority interests in the accompanying
consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Since the consolidated statements of cash flows are intended to
reflect only cash receipt and cash payment activity, the consolidated
statements of cash flows do not reflect investing and financing activities
that affect recognized assets and liabilities and do not result in cash
receipts or cash payments. Such activity consisted of the following:
- In July 1991, CRI Liquidating received $2,334,150 in 12 3/4%
United States Department of Housing and Urban Development (HUD)
debentures as proceeds from the disposition of the mortgage
investment in Oak Hill Road Apartments. The proceeds from the
redemption of the HUD debentures, including interest, were
received in January 1992.
Cash payments made for interest for the years ended December 31, 1992,
1993 and 1994 were $20,826,987, $22,448,356 and $29,691,138, respectively.
INVESTMENT IN MORTGAGES
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). This statement
requires that most investments in debt and equity securities be classified
into one of the following investment categories based upon the
circumstances under which such securities might be sold: Held to Maturity,
Available for Sale, and Trading. Generally, certain debt securities for
which an enterprise has both the ability and intent to hold to maturity
should be accounted for using the amortized cost method and all other
securities must be recorded at their fair values. This statement was
adopted for the year ended December 31, 1993.
CRIIMI MAE, an infinite-life entity, has the intent and ability to
hold its mortgage investments until maturity.
<PAGE>
67
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies - Continued
Consequently, all of its mortgage investments have been classified as Held
to Maturity and continue to be recorded at amortized cost as of December
31, 1994. CRI Liquidating intends to dispose of its existing Government
Insured Multifamily Mortgages by 1997 through an orderly liquidation. In
order to achieve this objective, CRI Liquidating will sell certain of its
mortgage investments in addition to mortgages assigned to HUD.
Consequently, the Adviser believes that the mortgage investments held by
CRI Liquidating fall into the Available for Sale category (as defined by
SFAS 115). As such, as of December 31, 1993 and 1994, all of CRI
Liquidating's mortgage investments are recorded at fair value with CRIIMI
MAE's share of the net unrealized gains on CRI Liquidating's mortgage
investments reported as a separate component of shareholders' equity.
Subsequent increases or decreases in the fair value of Available for Sale
mortgage investments will be included as a separate component of
shareholders' equity. Realized gains and losses for mortgage investments
classified as Available for Sale will continue to be reported in earnings,
as discussed below. Prior to December 31, 1993, CRI Liquidating accounted
for its mortgage investments at amortized cost.
The difference between the cost and the unpaid principal balance at
the time of purchase is carried as a discount or premium and amortized over
the remaining contractual life of the mortgage using the effective interest
method. The effective interest method provides a constant yield of income
over the term of the mortgage.
Mortgage investment income is comprised of amortization of the
discount plus the stated mortgage interest payments received or accrued
less amortization of the premium.
CRIIMI MAE's consolidated investment in mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest
in Government Insured Multifamily Mortgages issued or sold pursuant to
programs of the Federal Housing Administration (FHA) (FHA-Insured Loans),
mortgage-backed securities guaranteed by the Government National Mortgage
Association (GNMA) (GNMA-Mortgage-Backed Securities) and certain other
mortgage investments which are not federally insured or guaranteed. Payment
of principal and interest on FHA-Insured Loans is insured by HUD pursuant
to Title 2 of the National Housing Act. Payment of principal and interest
on GNMA-Mortgage-Backed Securities is guaranteed by GNMA pursuant to Title
3 of the National Housing Act.
INVESTMENT IN SUBORDINATED SECURITIES
As an infinite-life entity, CRIIMI MAE has the intent and ability to
hold its investments in subordinated securities until maturity.
Consequently, these investments
<PAGE>
68
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies - Continued
are classified as Held to Maturity and are carried at amortized cost as of
December 31, 1994.
Income on investments in subordinated securities is recognized on the
effective interest method using the anticipated yield to maturity on these
investments.
MORTGAGES HELD FOR DISPOSITION
At any point in time, CRIIMI MAE may be aware of certain mortgages
which have been assigned to HUD or for which the servicer has received
proceeds from a prepayment. In these cases, CRIIMI MAE will classify these
mortgages as Mortgages Held for Disposition. Mortgages Held for
Disposition have been accounted for at the lower of cost or market prior to
December 31, 1993, and at fair value as of December 31, 1993 and 1994 under
the Available for Sale criteria of SFAS 115.
Gains from dispositions of mortgages are recognized upon the receipt
of funds or HUD debentures.
Losses on dispositions of mortgages are recognized when it becomes
probable that a mortgage will be disposed of and that the disposition will
result in a loss.
INVESTMENT IN INSURED MORTGAGE FUNDS AND ADVISORY
PARTNERSHIP
The acquisition of certain interests in the AIM Funds in September
1991, including certain acquisition costs aggregating approximately $7.7
million, have been recorded under the purchase method of accounting, which
provides that the investment be recorded at cost, including the acquisition
costs. CRIIMI MAE is utilizing the equity method of accounting for its
investment in the AIM Funds and advisory partnership, which provides for
recording CRIIMI MAE's share of net earnings or losses in the AIM Funds and
advisory partnership reduced by distributions from the limited partnerships
and adjusted for purchase accounting amortization. The purchase price,
including the deferred acquisition costs, was allocated among the general
partner interests and the advisory partnership interest based on the
partnerships' and advisory contracts' estimated fair values. The general
partnership and advisory interests were assigned a total value of
approximately $27 million and $5 million, respectively.
DEFERRED COSTS
Included in deferred costs are mortgage selection fees, which have
been paid to the Adviser of CRIIMI MAE or were paid to the former general
partners or adviser to the CRIIMI Funds. These deferred costs are being
amortized using the
<PAGE>
69
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies - Continued
effective interest method on a specific mortgage basis from the date of the
acquisition of the related mortgage to the expected dissolution date of CRI
Liquidating or over the term of the mortgage for CRIIMI MAE. Upon
disposition of a mortgage, the related unamortized fee is treated as part
of the mortgage investment carrying value in order to measure the gain or
loss on the disposition.
DEFERRED FINANCING COSTS
Costs incurred in connection with the establishment and issuance of
CRIIMI MAE's financing facilities are amortized using the effective
interest method over the terms of the borrowings.
INTEREST RATE HEDGE AGREEMENTS
Amounts to be paid or received under interest rate hedge agreements
are accrued currently and are netted for financial statement presentation
purposes.
SHAREHOLDERS' EQUITY
CRIIMI MAE has authorized 60,000,000 shares of $.01 par value common
stock and issued 21,184,807 and 26,227,253 shares as of December 31, 1993
and 1994, respectively. All shares issued, exclusive of the shares held in
treasury, are outstanding. As of December 31, 1993 and 1994, respectively,
7,732 and 7,421 shares were held for issuance pending presentation of
predecessor units and were considered outstanding. Additionally, 25,000,000
shares of $.01 par value preferred stock are authorized; however, no shares
are issued or outstanding.
INCOME TAXES
CRIIMI MAE and CRI Liquidating have qualified and intend to continue
to qualify as REITs as defined in the Internal Revenue Code and, as such,
will not be taxed on that portion of their taxable income which is
distributed to shareholders provided that at least 95% of such taxable
income is distributed. CRIIMI MAE and CRI Liquidating intend to distribute
substantially all of their taxable income and, accordingly, no provision
for income taxes has been made in the accompanying consolidated financial
statements. CRIIMI MAE and CRI Liquidating, however, may be subject to tax
at normal corporate rates on net income or capital gains not distributed.
<PAGE>
70
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies - Continued
PER SHARE AMOUNTS
Net income, dividends and return of capital per share amounts for
1992, 1993 and 1994 represent net income, dividends and return of capital,
respectively, divided by the weighted average shares outstanding during
each year. The weighted average shares outstanding include shares held for
issuance pending presentation of predecessor units in the CRIIMI Funds.
<PAGE>
71
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties
Below is a summary of the related party transactions which occurred during
the years 1992, 1993 and 1994. These items are described further in the text
which follows:
<TABLE>
<CAPTION>
For the years ended December 31,
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
PAYMENTS TO THE ADVISER:
Annual fee - CRIIMI MAE (a)(h) $ 859,409 $ 1,266,494 $ 2,567,101
Annual fee - CRI Liquidating (a) 1,214,409 1,234,291(g) 696,342(g)
Incentive fee - CRIIMI MAE (a) 163,798 213,972 497,675
Incentive fee - CRI Liquidating (f) -- 256,290 394,812
Mortgage selection fees - CRIIMI MAE (b) 110,120 2,416,253 1,570,415
------------ ------------ ------------
Total $ 2,347,736 $ 5,387,300 $ 5,726,345
============ ============ ============
PAYMENTS TO CRI:
Expense reimbursement - CRIIMI MAE (c) $ 650,988 $ 707,110 $ 1,524,440
Expense reimbursement - CRI Liquidating (c) 244,457 254,039 285,423
------------ ------------ ------------
Total $ 895,445 $ 961,149 $ 1,809,863
============ ============ ============
AMOUNTS RECEIVED OR ACCRUED FROM RELATED PARTIES
CRIIMI,INC.
Income (d) $ 1,581,996 $ 2,015,861 $ 1,905,074
Return of capital (e) 585,567 13,108 737,560
------------ ------------ -------------
Total $ 2,167,563 $ 2,028,969 $ 2,642,634
============ ============ =============
CRI/AIM Investment Limited Partnership (d)(h) $ 700,000 $ 700,000 $ 700,000
============ ============ =============
<FN>
(a) Included in the accompanying consolidated statements of income.
(b) Included as deferred costs on the accompanying consolidated balance sheets
and amortized over the expected mortgage life.
(c) Included as general and administrative expenses on the accompanying
consolidated statements of income.
(d) Included as income from investment in insured mortgage funds and advisory
partnership, before amortization, on the accompanying consolidated
statements of income.
(e) Included as a reduction of investment in insured mortgage funds and
advisory partnership on the accompanying consolidated balance sheets.
(f) Netted with gains on mortgage dispositions on the accompanying consolidated
statements of income.
(g) As a result of reaching the Carryover CRIIMI I Target Yield during 1994 and
1993, CRI Liquidating paid deferred annual fees of $118,659 for 1994 and
$330,087 for 1993. The amount paid in 1993 included deferred annual fees
of $86,395 from 1992.
(h) As of June 1, 1993, pursuant to the First Amendment to the CRI Insured
Mortgage Association, Inc. Advisory Agreement, CRIIMI MAE was granted the
right to reduce the amounts paid to the Adviser by the difference between
CRIIMI MAE's guaranteed $700,000 distribution from CRI/AIM Investment
Limited Partnership and the amount actually paid to CRIIMI MAE by CRI/AIM
Investment Limited Partnership. As such, the amounts paid to the Adviser
for the year ended December 31, 1994 were reduced by $312,222, and the
amounts paid to the Adviser for the year ended December 31, 1993 were
reduced by $101,859, which represents the difference between the guaranteed
distribution for the period and the amount actually paid to CRIIMI MAE.
Additionally, during 1993 CRIIMI MAE was paid $199,805 in connection with
the guaranteed distribution.
</TABLE>
<PAGE>
72
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties - Continued
CRIIMI MAE'S ADVISORY AGREEMENT
CRIIMI MAE has entered into an agreement with the Adviser (the Advisory
Agreement) under which the Adviser is obligated to present an investment program
to CRIIMI MAE, to evaluate and negotiate voluntary and involuntary mortgage
dispositions, provide administrative services for CRIIMI MAE and conduct CRIIMI
MAE's day-to-day operations.
The Advisory Agreement is for a term through November 27, 1995. The
Advisory Agreement, absent a notice of termination or non-renewal, will be
automatically renewed for successive three-year terms. The Advisory Agreement
may be terminated solely for cause, as defined in the Advisory Agreement, by
CRIIMI MAE or the Adviser. Notice of non-renewal must be given at least 180
days prior to the expiration date of the Advisory Agreement. If CRIIMI MAE
terminates the Advisory Agreement other than for cause, or the Adviser termi-
nates the Advisory Agreement for cause, in addition to compensation otherwise
due, CRIIMI MAE will be required to pay the Adviser a fee equal to the Annual
Fee (as described below) payable for the previous fiscal year. If the Advisory
Agreement is not renewed, no termination fee will be payable.
Under the Advisory Agreement, the Adviser receives compensation from CRIIMI
MAE as follows:
o An annual fee (the Annual Fee) for managing CRIIMI MAE's portfolio of
mortgages. The Annual Fee is equal to 0.375% of average invested
assets invested in Additional Mortgage Investments (defined as
mortgages acquired by CRIIMI MAE after the CRIIMI Merger), payable
quarterly.
o Included in the Annual Fee shown in the preceding table is the Master
Servicing Fee for overseeing the servicing of the Additional Mortgage
Investments. The master servicing fee is equal to 0.025% annually of
the outstanding face balance of the Additional Mortgage Investments,
payable quarterly.
o A mortgage selection fee for analyzing, evaluating and structuring
Additional Mortgage Investments. The mortgage selection fee equals
0.75% of amounts invested in Additional Mortgage Investments. The
Adviser is also entitled to receive one-half of the fees paid to
CRIIMI MAE by the owner or developer of a property underlying a
participating mortgage investment, provided that the interest rate on
the base mortgage investment is at least equal to the prevailing
market interest rate for similar base mortgage investments coupled
with investments in limited partnerships.
<PAGE>
73
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties - Continued
In 1991, the Adviser adopted a policy with respect to borrowings above
and beyond the original $140 million notes and $140 million Commercial
Paper Facility (Incremental Borrowings) which would result in a
reduction in the amount of fees payable by CRIIMI MAE if Net Positive
Spreads (the difference between the yield on mortgage investments
purchased after those mortgages purchased with the original $140
million notes and $140 million Commercial Paper Facility and the cost
of funds for all Incremental Borrowings including associated operating
costs on a tax basis) are not maintained: the total annual fee and
master servicing fee of 0.40% of invested assets payable to the
Adviser with respect to mortgage investments purchased after those
mortgages acquired with the proceeds of the original $140 million
notes and $140 million Commercial Paper Facility will be reduced
incrementally if CRIIMI MAE's Net Positive Spread on such debt falls
below 0.40%. During 1994, the Net Positive Spread on the Incremental
Borrowings was in excess of 0.40%. Additionally, as required by this
policy the mortgage selection fee will be eliminated upon reinvestment
of proceeds of mortgage dispositions where the mortgage investment was
purchased with borrowed funds and disposed of in less than five years
without providing a cumulative yield on the original mortgage
investment at disposition of at least 100 basis points higher than the
original yield at the date of purchase.
o An incentive fee equal to 25% of the amount by which net income from
Additional Mortgage Investments exceeds the annual target return on
equity is payable quarterly, subject to year-end adjustment. Net
income from Additional Mortgage Investments is the difference between
mortgage investment income, including gains or losses on dispositions,
from the mortgage investments directly invested in by CRIIMI MAE less
financing costs and operating expenses, including a portion of CRIIMI
MAE's general and administrative and professional expenses that the
Adviser has determined to be specifically assigned to those mortgage
investments. All amounts for the purposes of this computation are on
a tax basis. The target return on equity will be determined on a
quarterly basis and will equal 1% over the average yield on Treasury
Bonds maturing nearest to ten years from such quarter, as reported on
a daily basis throughout such quarter, based on quotations supplied by
the Federal Reserve Bank of New York, as reported by The Wall Street
Journal.
As discussed in Note 1, in connection with the proposed transaction in
which CRIIMI MAE would become a self-managed and self-administered REIT, CRIIMI
MAE would acquire the CRI Mortgage
<PAGE>
74
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties - Continued
Businesses. If this transaction is approved by the special committee of
independent directors and the stockholders, all payments made by CRIIMI MAE
under the Advisory Agreement to the Adviser and to CRI would cease upon the
consummation of the transaction and CRIIMI MAE would no longer have a guaranteed
$700,000 distribution from CRI/AIM Investment Limited Partnership. Although
expense reimbursements to CRI by CRIIMI MAE would no longer be made, CRIIMI MAE
would incur these expenses directly.
CRI LIQUIDATING ADVISORY AGREEMENT
CRI Liquidating has also entered into an agreement with the Adviser (CRI
Liquidating Advisory Agreement) under which the Adviser is obligated to evaluate
and negotiate voluntary mortgage dispositions, provide administrative services
for CRI Liquidating and conduct CRI Liquidating's day-to-day affairs.
Under the CRI Liquidating Advisory Agreement, the Adviser receives
compensation from CRI Liquidating as follows:
o An annual fee (the CRI Liquidating Annual Fee) for managing CRI
Liquidating's portfolio of mortgages. The CRI Liquidating Annual Fee
is calculated separately for each of the remaining mortgage pools from
the former CRIIMI Funds. With respect to CRIIMI I, the CRI Liquidating
Annual Fee will equal 0.75% of average invested assets invested in
mortgage investments transferred by CRIIMI I in the CRIIMI Merger,
one-third of which will be deferred and paid on a cumulative basis
only during such quarters as the carryover CRIIMI I target yield, as
discussed below, is achieved on a cumulative basis. Any such deferred
amounts will be paid only out of proceeds of mortgage dispositions
attributable to CRIIMI I mortgage investments.
With respect to CRIIMI II, the CRI Liquidating Annual Fee will equal
0.75% of average invested assets invested in existing mortgage
investments transferred by CRIIMI II in the CRIIMI Merger, one-fourth
of which will be deferred and paid on a cumulative basis only during
such quarters as the carryover CRIIMI II target yield, as discussed
below, is achieved on a cumulative basis. Any such deferred amounts
will be paid only out of operating income attributable to CRIIMI II
mortgage investments.
With respect to CRIIMI III, the CRI Liquidating Annual Fee will equal
0.25% of average invested assets invested in mortgage investments
transferred by CRIIMI III in the CRIIMI Merger. As of December 31,
1993, this fee was reduced to 0.125% for any quarter that the
carryover CRIIMI III cumulative annual fee yield, as discussed below,
is not achieved.
<PAGE>
75
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties - Continued
The carryover CRIIMI I target yield will be achieved during any
quarter that the former CRIIMI I mortgage investments transferred in
the CRIIMI Merger generate a cumulative yield (including gains or
losses on mortgage dispositions) on amounts invested in such assets of
13.33% per annum based on financial statement income. The carryover
CRIIMI II target yield will be achieved during any quarter that the
former CRIIMI II mortgage investments transferred in the CRIIMI Merger
generate a cumulative yield (including gains or losses on mortgage
dispositions) on amounts invested in such assets of 11.66% per annum
based on financial statement income. The carryover CRIIMI III
cumulative annual fee yield will be achieved during any quarter,
commencing after December 31, 1993, that the former CRIIMI III
mortgage investments transferred in the CRIIMI Merger generate a
cumulative yield (including gains or losses on mortgage dispositions)
on amounts invested in such assets of 10.89% per annum based on
financial statement income.
<PAGE>
76
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties - Continued
Detail of the CRI Liquidating Annual Fees for the years 1992, 1993 and
1994 is as follows:
<TABLE>
<CAPTION>
For the year ended December 31, 1992
Cumulative Actual Annual Fees Paid Annual
Target/Annual Cumulative Annual Deferred Fees Cumulative
Yield Yield Component Component Total Deferred Deferred
------------- ---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CRIIMI I 13.33% 13.24% $ 344,090 $ 85,650 $ 429,740 $ 86,395 $ 86,395
CRIIMI II 11.66% 9.92% 540,204 -- 540,204 180,068 1,711,130
CRIIMI III 10.89% 8.07% 244,465 -- 244,465 -- --
----------- ----------- ----------- ----------- -----------
Totals $ 1,128,759 $ 85,650 $ 1,214,409 $ 266,463 $ 1,797,525
=========== =========== =========== =========== ===========
<CAPTION>
For the year ended December 31, 1993
Cumulative Actual Annual Fees Paid Annual
Target/Annual Cumulative Annual Deferred Fees Cumulative
Yield Yield Component Component Total Deferred Deferred
------------- ---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CRIIMI I 13.33% 13.33% $ 314,595 $ 243,692 $ 558,287 $ -- $ --
CRIIMI II 11.66% 10.05% 484,147 -- 484,147 162,390 1,873,520
CRIIMI III 10.89% 8.05% 191,857 -- 191,857 -- --
----------- ----------- ----------- ---------- -----------
Totals $ 990,599 $ 243,692 $ 1,234,291 $ 162,390 $ 1,873,520
=========== =========== =========== ========== ===========
<CAPTION>
For the year ended December 31, 1994
Cumulative Actual Annual Fees Paid Annual
Target/Annual Cumulative Annual Deferred Fees Cumulative
Yield Yield Component Component Total Deferred Deferred
------------- ---------- ----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CRIIMI I 13.33% 13.40% $ 237,051 $ 118,659 $ 355,710 $ -- $ --
CRIIMI II 11.66% 10.58% 266,215 -- 266,215 88,297 1,961,817
CRIIMI III 10.89% 7.95% 74,417 -- 74,417 -- --
----------- ----------- ----------- ---------- -----------
Totals $ 577,683 $ 118,659 $ 696,342 $ 88,297 $ 1,961,817
=========== =========== =========== ========== ===========
</TABLE>
<PAGE>
77
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Transactions with Related Parties - Continued
o The Adviser is also entitled to certain incentive fees (the Incentive
Fees) in connection with the disposition of certain mortgage
investments. Like the CRI Liquidating Annual Fee, the Incentive Fees
are calculated separately with respect to mortgage investments
transferred in the CRIIMI Merger by CRIIMI I and CRIIMI II. No
Incentive Fees are payable with respect to mortgage investments
transferred by CRIIMI III.
During any quarter in which either the carryover CRIIMI I or CRIIMI II
target yields have been achieved on a cumulative basis and the Adviser
has been paid any deferred amounts of the CRI Liquidating Annual Fee,
the Incentive Fee will equal approximately 9.08% of net disposition
proceeds representing the financial statement gain on the related
CRIIMI I or CRIIMI II mortgage investments disposed of.
The carryover CRIIMI I adjusted contribution and the carryover CRIIMI
II adjusted share capital equal the aggregate adjusted contribution of
CRIIMI I investors (initial investment of investors reduced by all
amounts distributed to them representing distributions of principal on
their original mortgage investments other than distributions of
proceeds of mortgage dispositions representing market discount that
have been applied to the target yield) and the aggregate share capital
of CRIIMI II investors (initial investment of investors reduced by all
amounts distributed to them representing distributions of principal on
their original mortgage investments other than distributions of
proceeds of mortgage dispositions representing market discount that
have been applied to the target yield), respectively, as of November
27, 1989, the consummation date of the CRIIMI Merger. Subsequent to
November 27, 1989, the carryover CRIIMI I adjusted contribution and
the carryover CRIIMI II adjusted share capital are reduced by all
amounts of principal received from their respective former mortgage
investments, whether as part of regular mortgage payments or as
proceeds of mortgage dispositions, except for proceeds of mortgage
dispositions representing market discount that have been applied to
the respective target yield.
As discussed in Note 1 the proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered REIT has no impact on the payments
required to be made by CRI Liquidating, other than that the expense
reimbursement currently paid by CRI Liquidating to CRI in connection with the
provision of services by its Adviser will be paid to CRIIMI MAE subsequent to
the consummation of the proposed transaction.
<PAGE>
78
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Fair Value of Financial Instruments
The following estimated fair values of CRIIMI MAE's consolidated financial
instruments are presented in accordance with generally accepted accounting
principles which define fair value as the amount at which a financial instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. These estimated fair values, however, do not
represent the liquidation value or the market value of CRIIMI MAE.
In connection with CRIIMI MAE's and CRI Liquidating's implementation of
SFAS 115 as of December 31, 1993 (see Note 2), CRIIMI MAE's Investment in
Mortgages continues to be recorded at amortized cost; however, CRI Liquidating's
Investment in Mortgages is recorded at fair value as of December 31, 1993 and
1994. The difference between the amortized cost and the fair value of CRI
Liquidating's Government Insured Multifamily Mortgages represents the net
unrealized gains on CRI Liquidating's Government Insured Multifamily Mortgages.
CRIIMI MAE's share of the net unrealized gains on CRI Liquidating's Government
Insured Multifamily Mortgages is reported as a separate component of
shareholders' equity as of December 31, 1993 and 1994.
<PAGE>
79
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Fair Value of Financial Instruments
<TABLE>
<CAPTION>
As of December 31, 1993 As of December 31, 1994
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investment in mortgages,
accounted for at amortized cost:
Near par or premium $495,846,514 $505,578,030 $698,226,137 $648,201,775
Discount 903,982 1,004,399 4,989,616 4,860,606
------------ ------------ ------------ ------------
496,750,496 506,582,429 703,215,753 653,062,381
------------ ------------ ------------ ------------
Investment in mortgages, accounted for
at fair value:
Discount 176,507,231 227,192,792 121,283,765 139,416,004
Near par or premium 16,983,594 17,647,797 14,837,135 14,957,572
------------ ------------ ------------ ------------
193,490,825 244,840,589 136,120,900 154,373,576
------------ ------------ ----------- ------------
Investment in subordinated securities -- -- 38,858,349 38,353,226
Cash and cash equivalents 13,599,860 13,599,860 5,143,171 5,143,171
Accrued interest receivable 5,702,667 5,702,667 7,130,597 7,130,597
LIABILITIES
Commercial paper 95,306,000 95,306,000 -- --
OBLIGATIONS UNDER FINANCING FACILITIES
Master Repurchase Agreements 331,712,648 331,712,648 456,984,347 456,984,347
Revolving Credit Facility -- -- 115,000,000 115,000,000
Other Repurchase Agreements -- -- 24,891,783 24,891,783
Bank Term Loan 52,026,400 52,026,400 30,371,800 30,371,800
------------ ------------ ------------ ------------
383,739,048 383,739,048 627,247,930 627,247,930
------------ ------------ ------------ ------------
OFF BALANCE SHEET
Interest rate hedge
agreements-asset (liability) 4,113,713 (3,115,531) 6,053,163 21,438,096
</TABLE>
<PAGE>
80
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
INVESTMENT IN MORTGAGES
The fair value of the Government Insured Multifamily Mortgages is based on
the average of the quoted market prices from three investment banking
institutions who trade these instruments as part of their day-to-day activities.
INVESTMENT IN SUBORDINATED SECURITIES
The fair value of the subordinated securities is based on the price
obtained from an investment banking institution which trades subordinated
securities. Given the limited market for these securities, only one quote was
available.
CASH AND CASH EQUIVALENTS AND ACCRUED INTEREST RECEIVABLE
The carrying amount approximates fair value because of the short maturity
of these instruments.
COMMERCIAL PAPER
The carrying amount approximates fair value because of the short maturity
of the debt.
OBLIGATIONS UNDER FINANCING FACILITIES
The carrying amount approximates fair value because the current rate on the
debt is reset quarterly based on market rates.
INTEREST RATE HEDGE AGREEMENTS
The fair value of interest rate hedge agreements (used to hedge CRIIMI
MAE's debt) is the estimated amount that CRIIMI MAE would pay or receive to
terminate the agreements as of December 31, 1993 and 1994, taking into account
current interest rates and the current creditworthiness of the counterparties.
The amount was determined based on the average of two quotes received from
financial institutions which enter into these types of transactions as part of
their day-to-day activities.
5. Investment in Mortgages
As of December 31, 1993 and 1994, CRIIMI MAE directly owned 126 and 173
Government Insured Multifamily Mortgages and Government Insured Construction
Mortgages, respectively, which had a weighted average net effective interest
rate of approximately 8.22% and 8.00%, a weighted average remaining term of
approximately 34 years and 33 years, and a tax basis of approximately $499
million and $703 million, respectively.
<PAGE>
81
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
As of December 31, 1993 and 1994, CRIIMI MAE indirectly owned through its
subsidiary, CRI Liquidating, 63 and 44 Government Insured Multifamily Mortgages,
respectively, which had a weighted average net effective interest rate of
approximately 9.97% and 10.02%, a weighted average remaining term of
approximately 27 years and 26 years, and a tax basis of approximately $173
million and $123 million, respectively.
Thus, on a consolidated basis, as of December 31, 1993 and 1994, CRIIMI MAE
owned, directly or indirectly, 189 and 217 Government Insured Multifamily
Mortgages and Government Insured Construction Mortgages, respectively. These
investments (including Mortgages Held for Disposition) had a weighted average
net effective interest rate of approximately 8.70%, a weighted average remaining
term of approximately 32 years and a tax basis of approximately $672 million, as
of December 31, 1993. These amounts compare to a weighted average net effective
interest rate of approximately 8.33%, a weighted average remaining term of
approximately 32 years and a tax basis of approximately $826 million, as of
December 31, 1994. In addition, as of December 31, 1994, CRIIMI MAE had
committed approximately $9.0 million for advances on FHA-Insured Loans relating
to the construction or rehabilitation of multifamily housing projects, including
nursing homes and intermediate care facilities (Government Insured Construction
Mortgages).
During 1994, CRIIMI MAE directly acquired 51 Government Insured Multifamily
Mortgages with an aggregate purchase price of approximately $194 million with a
weighted average net effective interest rate of approximately 7.79% and a
weighted average remaining term of approximately 32 years. In addition, during
1994, CRIIMI MAE funded advances of approximately $41.8 million on Government
Insured Construction Mortgages with a weighted average net effective interest
rate of approximately 8.22%. These loans are anticipated to convert to
permanent loans over the next 7 months with an anticipated maturity of 40 years.
As discussed below, CRIIMI MAE makes direct investments in primarily two
categories of Government Insured Multifamily Mortgages at, near, or above par
value (Near Par or Premium Mortgage Investments).
FHA-Insured Investments--The first category of Near Par or Premium Mortgage
Investments in which CRIIMI MAE invests consists of participation certificates
evidencing a 100% undivided beneficial interest in Government Insured
Multifamily Mortgages insured by FHA pursuant to provisions of the National
Housing Act (FHA-Insured Loans). All of the FHA-Insured Loans in which CRIIMI
MAE invests are insured by HUD for effectively 99% of their current face value.
As part of its investment strategy, CRIIMI MAE also invests in Government
Insured Construction Mortgages which involve a two-tier financing process in
which a short-term loan covering construction costs is converted into a
permanent loan. CRIIMI MAE also becomes the holder of the
<PAGE>
82
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
permanent loan upon conversion. The construction loan is funded in HUD-approved
draws based upon the progress of construction. The construction loans are GNMA-
guaranteed or insured by HUD. The construction loan generally does not amortize
during the construction period. Amortization begins upon conversion of the
construction loan into a permanent loan, which generally occurs within a
24-month period from the initial endorsement by HUD. Approximately 31% of
CRIIMI MAE's near par or premium mortgage investments are FHA-Insured Loans or
Government Insured Construction Mortgages as of December 31, 1994.
Mortgage-Backed Securities--The second category of Near Par or Premium
Mortgage Investments in which CRIIMI MAE invests consists of federally
guaranteed mortgage-backed securities or other securities backed by Government
Insured Multifamily Mortgages issued by entities other than GNMA
(Mortgage-Backed Securities) and Mortgage-Backed Securities 100% guaranteed as
to principal and interest by GNMA (GNMA Mortgage-Backed Securities). As of
December 31, 1994, all of CRIIMI MAE's mortgage investments in this category
were GNMA Mortgage-Backed Securities. The GNMA Mortgage-Backed Securities in
which CRIIMI MAE invests are backed by Government Insured Multifamily Mortgages
insured in whole by HUD, or insured by HUD and a coinsured lender under HUD
mortgage insurance programs and the coinsurance provisions of the National
Housing Act. The Mortgage-Backed Securities in which CRIIMI MAE is permitted to
invest, although none have been acquired as of December 31, 1994, are backed by
Government Insured Multifamily Mortgages which are insured in whole by HUD under
HUD mortgage insurance programs. Approximately 69% of CRIIMI MAE's near par or
premium mortgage investments are GNMA Mortgage-Backed Securities as of December
31, 1994.
CRI Liquidating Mortgage Investments--CRI Liquidating's mortgage
investments consist solely of the Government Insured Multifamily Mortgages it
acquired from the CRIIMI Funds in the CRIIMI Merger. The CRIIMI Funds invested
primarily in Government Insured Multifamily Mortgages issued or sold pursuant to
programs of GNMA and FHA.
<PAGE>
83
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
Descriptions of the mortgage investments owned, directly or indirectly by
CRIIMI MAE which exceed 3% of the total carrying amount of the consolidated
mortgage investments as of December 31, 1994, summarized information regarding
other mortgage investments and mortgage investment income earned in 1992, 1993
and 1994, including interest earned on the disposed mortgage investments, are as
follows:
<TABLE>
<CAPTION>
Mortgage Mortgage Mortgage
Carrying Effective Investment Investment Investment Final
Face Value of Interest Income Income Income Maturity
Amount of Mortgages Rate Earned Earned Earned Date
Mortgages(B) (A),(C),(D) Range in 1992 in 1993 in 1994 Range
------------- ------------- --------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
CRIIMI MAE
FHA-INSURED LOANS
DISCOUNT
Other
(2 mortgages) $ 940,394 $ 900,658 10.248%- $ 93,629 $ 93,335 $ 93,009 March 2020 -
10.492% April 2031
NEAR PAR OR PREMIUM
Other
(46 mortgages) 175,217,387 175,269,093 7.345%- 2,307,929 5,180,879 12,723,293 May 1999 -
11.000% June 2034
CONSTRUCTION
LOANS (8)
Other
(8 loans) 40,093,680 40,271,456 7.500%- 5,422,891 5,099,429 4,145,462** *
9.250%
</TABLE>
<PAGE>
84
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
<TABLE>
<CAPTION>
Mortgage Mortgage Mortgage
Carrying Investment Investment Investment
Face Value of Effective Income Income Income Final
Amount of Mortgages Interest Earned Earned Earned Maturity
Mortgages(B) (A),(C),(D) Rate in 1992 in 1993 in 1994 Date
------------- ------------- --------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
GNMA Mortgage-
Backed Securities
- -----------------
Discount
- --------
Other
(2 mortgages) $ 4,148,517 $ 4,088,958 8.458%- $ -- $ -- $ 175,671 December 2022 -
8.627% June 2034
Near Par or Premium
- -------------------
San Jose South 29,709,700 29,973,553 7.656%- -- 11,479 2,157,217 October 2023
Somerset Park 29,993,364 30,567,453 7.407% -- 734,515 2,197,079 July 2028
Other
(113 mortgages) 419,703,851 422,144,582 7.114%- 7,148,300 13,517,932 29,112,289 August 2015 -
10.935% November 2034
Sub-Total ------------ ------------ ------------ ------------ ------------
CRIIMI MAE
directly held $699,806,893 $703,215,753 $ 14,972,749 $ 24,637,569 $ 50,604,020
------------ ------------ ------------ ------------ ------------
CRI Liquidating
- ---------------
FHA-Insured Loans
- -----------------
Discount
- --------
Other
(38 mortgages) $152,614,384 $139,416,004 8.350%- $ 12,563,285 $ 12,483,996 $ 12,374,796 September 2012 -
12.480% March 2025
Near Par or Premium
- -------------------
Other (5 mortgages) 11,581,234 11,871,525 9.220%- 1,151,149 1,143,151 1,134,337 February 2023 -
10.790% June 2025
</TABLE>
<PAGE>
85
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
<TABLE>
<CAPTION>
Mortgage Mortgage Mortgage
Carrying Investment Investment Investment
Face Value of Effective Income Income Income Final
Amount of Mortgages Interest Earned Earned Earned Maturity
Mortgages(B) (A),(C),(D) Rate in 1992 in 1993 in 1994 Date
------------- ------------- --------- ------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
GNMA Mortgage-
Backed Securities
- -----------------
Near Par or Premium
- -------------------
Other (1 mortgage) $ 2,997,210 $ 3,086,047 10.14% $ 297,318 $ 295,749 $ 294,014 September 2022
------------ ------------ ------------ ------------ ------------
Sub-total CRI
Liquidating $167,192,828 $154,373,576 $ 14,011,752 $ 13,922,896 $ 13,803,147
------------ ------------ ------------ ------------ ------------
Total in mortgages $866,999,721 $857,589,329 $ 28,984,501 $ 38,560,465 $ 64,407,167
------------ ------------ ------------ ------------ ------------
Less CRI Liquidating's
share of mortgage interest
relating to investment in
limited partnerships
accounted for under the
equity method (972,704) (308,093) --
</TABLE>
<PAGE>
86
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
<TABLE>
<CAPTION>
Mortgage Mortgage Mortgage
Carrying Investment Investment Investment
Face Value of Effective Income Income Income
Amount of Mortgages Interest Earned Earned Earned
Mortgages(B) (A),(C),(D) Rate in 1992 in 1993 in 1994
------------- ------------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mortgage Dispositions:
1992 $ -- $ -- 9.48%- $ 979,109 $ -- $ --
12.04%
1993 -- -- 8.00%- 9,041,910 4,241,328 --
11.79%
1994 -- -- 8.44%- 7,898,132 7,775,872 2,636,175
12.12%
------------ ------------ ----------- ----------- -----------
Investment in
Mortgages $866,999,721 $857,589,329 $45,930,948 $50,269,572 $67,043,342
============ ============ =========== =========== ===========
Investment in
Limited Partner-
ships $ 133,767 $ 600,852 $ 43,605 $ (49,032)
============ =========== =========== ===========
<FN>
* Construction draws are part of a short-term financing process and are
funded to cover construction costs. The construction draws are converted
into a long-term permanent loan generally within a 24-month period from the
initial endorsement by HUD.
** Includes mortgage investment income earned on construction loans that
converted to permanent loans during 1994 (10 loans).
</TABLE>
<PAGE>
87
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
(A) All mortgages are collateralized by first or second liens on residential
apartment, retirement home, nursing home, development land or townhouse
complexes which have diverse geographic locations and are FHA-Insured Loans or
GNMA Mortgage-Backed Securities. Payment of the principal and interest on FHA-
Insured Loans is insured by HUD pursuant to Title 2 of the National Housing Act.
Payment of the principal and interest on GNMA Mortgage-Backed Securities is
guaranteed by GNMA pursuant to Title 3 of the National Housing Act. The
investment in limited partnerships is not federally insured or guaranteed.
(B) Principal and interest on permanent mortgages is payable at level amounts
over the life of the mortgage investment. Total annual debt service payable to
CRIIMI MAE and CRI Liquidating for the mortgage investments held as of December
31, 1994 is approximately $65.9 million.
(C) Reconciliations of the carrying amount of CRIIMI MAE's consolidated
mortgage investments for the years ended December 31, 1993 and 1994 follow:
<TABLE>
<CAPTION>
For the year ended For the year ended
December 31, 1993 December 31, 1994
----------------------------- ------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $472,963,233 $741,591,085
Additions during year:
Purchases 312,654,818 235,758,541
Amortization of discount 1,307,072 979,054
Net unrealized gains on mortgage
investments 51,349,764 --
Deductions during year:
Principal payments $ 4,527,816 $ 6,107,350
Mortgage dispositions 92,114,681 81,437,533
Adjustment to net unrealized
gains on mortgage investments -- 33,097,088
Accretion of premium 41,305 96,683,802 97,380 120,739,351
------------- ------------ ------------ ------------
Balance at end of year $741,591,085 $857,589,329
============ ============
</TABLE>
(D) The following FHA-Insured Loans and GNMA Mortgage-Backed Securities are
delinquent with respect to payment of principal and/or interest as of
December 31, 1994:
<TABLE>
<CAPTION>
Face Amount of Mortgage
As of December 31, 1994
-----------------------
<S> <C>
Stoddard Baptist Nursing Home $ 9,469,014
Hickory Hills Townhomes 6,581,373
Guinn Nursing Home 2,280,523
-----------
Principal amount of loans
subject to delinquent principal
or interest $18,330,910
===========
</TABLE>
<PAGE>
88
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Investment in Mortgages - Continued
HISTORICAL DISPOSITIONS
The following table sets forth certain information concerning dispositions
of Government Insured Multifamily Mortgages by CRIIMI MAE and CRI Liquidating
for the past three years:
<TABLE>
<CAPTION>
Net Gain/(Loss)
Recognized for Net Gain/(Loss)
Financial Recognized
Type of Dispositions Statement For Tax
Year Assignment(1) Sale Prepayment Total Purposes Purposes(3)
- ---- ------------- ---- ---------- ----- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1992-CRI Liq. 3 -- -- 3 $ 6,097,102 $ 11,202,237
CRIIMI MAE 4 -- -- 4 (363,957) (118,498)
1993-CRI Liq. 2 5 3 10 8,089,840 14,938,128
CRIIMI MAE 2 -- 5 7 (732,095) (650,339)
1994-CRI Liq. 3 14 2 19 12,553,280 18,354,125
CRIIMI MAE -- -- 7 7 446,028 646,223
--- --- --- --- ------------ ------------
14(2) 19 17 50 $ 26,090,198 $ 44,371,876
=== === === === ============ ============
<FN>
(1) CRIIMI MAE or CRI Liquidating may elect to receive insurance benefits in
the form of cash when a Government Insured Multifamily Mortgage defaults.
In that event, 90% of the face value of the mortgage generally is received
within approximately 90 days of assignment of the mortgage to HUD and 9% of
the face value of the mortgage is received upon final processing by HUD
which may not occur in the same year as assignment. If CRIIMI MAE or CRI
Liquidating elects to receive insurance benefits in the form of HUD
debentures, 99% of the face value of the mortgage is received upon final
processing by HUD. Gains from dispositions are recognized upon receipt of
funds or HUD debentures and losses generally are recognized at the time of
assignment.
(2) Five of the 14 assignments were sales of Government Insured Multifamily
Mortgages then in default and resulted in the CRIIMI Funds, CRI Liquidating
or CRIIMI MAE receiving near or above face value.
(3) In connection with the CRIIMI Merger, CRI Liquidating recorded its
investment in mortgages at the lower of cost or fair value, which resulted
in an overall net write down for tax purposes. For financial statement
purposes, carryover basis of accounting was used. Therefore, since the
CRIIMI Merger, the net gain for tax purposes was greater than the net gain
recognized for financial statement purposes. As a REIT, dividends to
shareholders are based on tax basis income.
</TABLE>
6. Investment in Subordinated Securities
In addition to investing in Government Insured Multifamily Mortgages,
CRIIMI MAE's board of directors has authorized CRIIMI MAE to invest up to 20% of
CRIIMI MAE's total consolidated assets in other mortgage investments which are
not federally insured or guaranteed. Since adoption of this policy, CRIIMI MAE
and its Adviser have been reviewing opportunities for investment in other real
estate securities which complement CRIIMI MAE's existing holdings. In the
current investment climate, CRIIMI MAE's Adviser believes that investments in
high yielding subordinated securities represent attractive investment
opportunities.
As of December 31, 1994, CRIIMI MAE had purchased three tranches of
securities issued by Mortgage Capital Funding, Inc. Series 1994-MC1 (MC-1) and
two tranches of securities issued by Mortgage Capital Funding, Inc. Series 1993-
C1 (C-1). Both MC-1 and C-1 issued multiple layers of securities and have
elected to be treated as real estate mortgage investment conduits (REMICs).
<PAGE>
89
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Investment in Subordinated Securities - Continued
The following table summarizes information related to these investments:
<TABLE>
<CAPTION>
Original Amortized
Face Purchase Cost Anticipated
Pool Tranche Amount Price (as of December 31, 1994) Yield to Maturity (1)
- ----------- -------------- ------------ ----------- ------------------------- --------------------
<S> <C> <C> <C> <C> <C>
MC-1 B-1 (BB Rated) $12,041,520 $ 9,693,424 $ 9,702,113 12.5%
B-2 (B Rated) 10,321,303 7,708,723 7,770,361 13.6%
B-3 (Unrated) 12,041,520 4,635,985 4,542,208 18.1%
----------- ----------- -----------
Subtotal 34,404,343 22,038,132 22,014,682
----------- ----------- -----------
C-1 D (BB Rated) 10,596,316 9,430,721 9,447,186 12.8%
E (B Rated) 9,082,557 7,379,578 7,396,481 14.8%
----------- ----------- -----------
Subtotal 19,678,873 16,810,299 16,843,667
----------- ----------- -----------
Total $54,083,216 $38,848,431 $38,858,349
=========== =========== ===========
<FN>
(1) The accounting treatment required under generally accepted accounting
principles requires that the income on these investments be recorded on a
level yield basis given the anticipated yield to maturity on these
investments. This currently results in income which is lower for financial
statement purposes than for tax purposes.
</TABLE>
At closing, MC-1 consisted of securities having a face value of
approximately $172 million. The collateral for the securities consisted of
uninsured mortgages with an unpaid principal balance (UPB) of approximately $172
million - 30 multifamily loans representing 72% of the UPB of the pool and 14
commercial loans representing 28% of the UPB of the pool. The composition of
the pool as of December 31, 1994 was substantially the same.
At closing, C-1 consisted of securities having a face value of
approximately $151 million. The collateral for the securities consisted of
uninsured mortgages with a UPB of approximately $151 million - 29 multifamily
loans representing 47% of the UPB of the pool and 32 commercial loans
representing 53% of the UPB of the pool. The composition of the pool as of
December 31, 1994 was approximately 39% multifamily and 62% commercial due to
prepayments of mortgages in the pool.
The REMICs allocate the cash flow from the underlying mortgages to the
securitized tranches, with the investment grade or higher rated tranches having
a priority right to the cash flow until their investment returns are met. Then,
any remaining cash flow is allocated among the other tranches in order of their
relative seniority. To the extent there are defaults and unrecoverable losses
on the underlying mortgages, resulting in reduced cash flows, the unrated
tranche will bear this loss first. To the extent there are losses in excess of
the unrated tranche's stated right to principal and interest, then the most
subordinated rated tranches will begin absorbing losses.
<PAGE>
90
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Investment in Subordinated Securities - Continued
As described in Note 10, during the third and fourth quarters of 1994,
CRIIMI MAE entered into a series of repurchase agreements which provided CRIIMI
MAE financing to purchase the four rated tranches of the subordinated
securities. Between 70% and 80% of the purchase price was financed for
aggregate borrowings of approximately $24.9 million. Under the agreements, the
interest rate is based upon the then current one-month or six-month LIBOR, as
applicable, plus 1.0% to 1.25% depending on the specific repurchase agreement.
In making these investments, CRIIMI MAE's Adviser and its affiliates
applied their knowledge of multifamily and commercial mortgages to perform due
diligence on the mortgage investments collateralizing the securities. This
analysis included reviewing the operating records of the underlying real estate
assets, reviewing appraisals, environmental studies, market studies,
architectural and engineering reviews, and reviewing, and where deemed
necessary, independently developing projected operating budgets. In addition,
site visits were conducted at substantially all of the properties, in an effort
to confirm market and architectural and engineering reviews.
CRIIMI MAE will generally make investments of this type when satisfactory
arrangements exist whereby CRIIMI MAE can closely monitor the collateral of the
pool. In this case, CRICO, an affiliate of the Adviser, will service the
majority of the mortgage investments comprising the pools, thereby enabling
CRICO to continuously monitor the performance of the pool, while actively
pursuing resolution of any delinquencies that may develop and maintaining
current records on the properties' operations and tax and insurance liabilities.
Additionally, CRICO is the special servicer for both pools which places it
directly in the position of asset manager in the event that a default occurs.
As special servicer, CRICO will use its efforts to create a financial solution
designed to maximize the benefit to all of the investors in the portfolio,
including CRIIMI MAE.
The anticipated returns on these investments are based upon a number of
assumptions that are currently subject to several business and economic
uncertainties and contingencies, including, without limitation, the lack of a
secondary market for these securities, prevailing interest rates, the general
condition of the real estate market, competition for tenants, and changes in
market rental rates. As these uncertainties and contingencies are generally
beyond CRIIMI MAE's control, no assurance can be given that the anticipated
yield to maturity will be achieved.
Although investments in Government Insured Multifamily Mortgages and
government insured or guaranteed multifamily construction loans will continue to
comprise the majority of CRIIMI MAE's total consolidated asset base, CRIIMI MAE
expects that investments similar to the REMIC tranches discussed above will
represent a major component of CRIIMI MAE's new business activity during 1995.
As of December 31, 1994, these investments
<PAGE>
91
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Investment in Subordinated Securities - Continued
represent approximately 4% of CRIIMI MAE's total consolidated assets.
Investments of this type are not anticipated to exceed 10% of CRIIMI MAE's total
consolidated asset base through 1995.
7. Reconciliation of Financial Statement Net Income to Tax
Basis Income
Reconciliations of the financial statement net income to the tax basis
income for the years ended December 31, 1992, 1993 and 1994 are as follows:
<TABLE>
<CAPTION>
1992 1993 1994
----------- ----------- -----------
<S> <C> <C> <C>
Consolidated financial statement
net income $16,041,231 $15,757,505 $26,010,119
Adjustment due to accounting for subsidiary
as a pooling for financial statement
purposes and a purchase for tax purposes 4,931,900 4,412,645 3,610,806
Income from investment in insured
mortgage funds and advisory partnership 504,157 87,341 (7,462)
Mortgage dispositions 245,459 81,756 200,195
Reamortization of investments in
subordinated securities -- -- 187,305
Interest income - U.S. Treasuries 1,074,517 973,619 860,202
Interest expense - defeased notes (1,583,318) (1,390,672) (1,198,027)
Interest expense - amortization of
deferred financing costs -- 366,093 (290,158)
Interest expense - write-off of deferred
financing costs 445,127 (280,683) 795,614
Gain on sale of shares of subsidiary -- 1,581,247 --
Provision for settlement of litigation -- 1,250,000 (557,340)
Other (33,343) 176,387 (4,831)
----------- ----------- -----------
Tax basis income $21,625,730 $23,015,238 $29,606,423
=========== =========== ===========
Tax basis income per share $ 1.07 $ 1.14 $ 1.17
=========== =========== ===========
Weighted average number
of shares outstanding (for tax purposes) 20,183,533 20,183,533 25,309,560
========== ========== ===========
</TABLE>
Differences in the financial statement net income and the tax basis income
principally relate to differences in the tax bases of assets and liabilities and
their related financial reporting amounts resulting from the CRIIMI Merger,
investment in mortgages, long-term debt and deferred financing costs, investment
in U.S. Treasury Securities and partnership investments. The tax basis of
investment in mortgages is approximately $13 million less than the financial
statement basis as of December 31, 1994. The tax basis of deferred financing
costs as of December 31, 1994 was approximately $6.7 million greater than the
financial statement basis. The tax basis of investments in U.S. Treasury
Securities, purchased in connection with the defeasance of long-term debt and
netted with the defeased long-term debt for financial statement purposes, is
approximately $12.6 million greater than the financial statement basis as of
December 31, 1994.
<PAGE>
92
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Reconciliation of Financial Statement Net Income to Tax
Basis Income - Continued
As a result of the foregoing, the nature of the dividends for income tax
purposes on a per share basis is as follows:
<TABLE>
<CAPTION>
1992 1993 1994
------ ------ ------
<S> <C> <C> <C>
Ordinary income $ 0.75 $ 0.81 $ .72
Long-term capital gains 0.33 0.31 .44
------ ------ ------
$ 1.08 $ 1.12 $ 1.16
====== ====== ======
</TABLE>
8. Other Short-Term Investments
During 1993, CRIIMI MAE, and, during each of 1992 and 1993, CRI Liquidating
entered into transactions in which mortgage-backed and other government agency
securities were purchased. These transactions provided CRIIMI MAE with above
average returns compared to its other short-term investments while maintaining
the high quality of its assets and assisted in maintaining CRI Liquidating's
REIT status. Some of these purchases were financed with borrowings which were
nonrecourse and fully secured with the purchased mortgage-backed and other
government agency securities. As of December 31, 1993, CRIIMI MAE and as of
December 31, 1992 and 1993, CRI Liquidating had disposed of the mortgage-backed
and other government agency securities acquired in such year and repaid the
related debt.
<PAGE>
93
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Summary of Quarterly Results of Operations (Unaudited)
The following is a summary of unaudited quarterly results of
operations for the years ended December 31, 1992, 1993 and 1994:
<TABLE>
<CAPTION>
1992
Quarter ended
March 31 June 30 September 30 December 31
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income (principally
mortgage investment
income) $ 12,601,668 $12,149,241 $13,123,895 $12,826,954
Net gain (loss) on mortgage
dispositions 5,311,633 9,708 487,507 (75,703)
Loss on investment in limited
partnership -- -- -- (731,951)
Net income 6,797,138 2,886,910 3,526,115 2,831,068
Net income per share .34 .14 .17 .14
<CAPTION>
1993
Quarter ended
March 31 June 30 September 30 December 31
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Income (principally
mortgage investment
income) $ 12,892,685 $ 12,912,261 $ 15,199,422 $ 15,445,887
Net gain on mortgage
dispositions 1,522,785 284,274 489,171 5,061,515
Net income 4,431,388 3,490,212 3,800,643 4,035,262
Net income per share .22 .17 .19 .20
<CAPTION>
1994
Quarter ended
March 31 June 30 September 30 December 31
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income (principally
mortgage investment
income) $ 15,918,972 $ 17,184,041 $ 19,164,345 $ 19,174,442
Net gain on mortgage
dispositions 11,627,196 445,747 724,439 201,926
Net income 9,982,050 6,076,374 5,449,251 4,502,444
Net income per share .47 .24 .22 .18
</TABLE>
10. Obligations under Financing Facilities
The following table summarizes CRIIMI MAE's debt outstanding as of
December 31, 1993 and December 31, 1994:
<TABLE>
<CAPTION>
As of As of
December 31, December 31,
1993 1994
------------ ------------
<S> <C> <C>
Master Repurchase Agreements $331,712,648 $456,984,347
Revolving Credit Facility -- 115,000,000
Bank Term Loan 52,026,400 30,371,800
Other Repurchase Agreements -- 24,891,783
Commercial Paper Facility 95,306,000 --
------------ ------------
Total Corporate Borrowings $479,045,048 $627,247,930
============ ============
</TABLE>
<PAGE>
94
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
CRIIMI MAE's debt matures over the next two years as follows:
<TABLE>
<S> <C>
1995 $ 90,691,783
1996 536,556,147
------------
Total $627,247,930
============
</TABLE>
MASTER REPURCHASE AGREEMENTS
On April 30, 1993, CRIIMI MAE entered into master repurchase agreements
(collectively, with the additional repurchase agreements described below, the
Master Repurchase Agreements) with Nomura Securities International, Inc. and
Nomura Asset Capital Corporation (collectively, Nomura) which provided CRIIMI
MAE with $350.0 million of available financing for a three-year term, expiring
April 30, 1996. Interest on such borrowings is based on the three-month LIBOR
plus .75% or .50% depending on whether FHA-Insured Loans or GNMA Mortgage-Backed
Securities, respectively, are pledged as collateral. The rate on the facility
as of December 31, 1994, including the applicable spreads, was 6.31% on the
borrowings secured by FHA-Insured Loans and 6.06% on the borrowings secured by
GNMA Mortgage-Backed Securities. The rates in effect on December 31, 1994 were
set on October 24, 1994 and reset on January 23, 1995 for three months at
6.875%, including the spread, for the borrowings secured by GNMA Mortgage-Backed
Securities. (As discussed below, the borrowings secured by FHA-Insured Loans
were paid off on January 23, 1995 with proceeds from a new facility with the
German American Capital Corporation (GACC)). The value of the FHA-Insured Loans
and the GNMA Mortgage-Backed Securities pledged as collateral must equal at
least 110% and 105%, respectively, of the amounts borrowed. No more than 60% of
the collateral pledged may be FHA-Insured Loans and no less than 40% may be GNMA
Mortgage-Backed Securities.
On November 30, 1993, CRIIMI MAE entered into additional repurchase
agreements with Nomura pursuant to which Nomura agreed to provide CRIIMI MAE
with an additional $150.0 million of available financing for a three-year term,
expiring October 27, 1996. Interest on such borrowings for the first twelve
months after the initial funding (April 1994 through April 1995) is based on the
three-month LIBOR plus .90% or .70% depending on whether FHA-Insured Loans or
GNMA Mortgage-Backed Securities, respectively, are pledged as collateral.
Interest on the borrowings from May 1995 to October 1995 and from November 1995
through the maturity of the facility will be based on three-month LIBOR plus
.50% and .30%, respectively, for borrowings secured by GNMA Mortgage Backed
Securities. (As discussed below, the borrowings secured by FHA-Insured Loans
were paid off on January 23, 1995 with proceeds from a new facility with the
GACC). The rate on the facility as of December 31, 1994, including the
applicable spreads was 6.46% on the borrowings secured by FHA-Insured Loans and
6.26% on borrowings secured by GNMA Mortgage-
<PAGE>
95
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
Backed Securities. The rates in effect on December 31, 1994 were set on October
24, 1994 and reset on January 23, 1995 for three months at 7.075%, including the
spread, for the borrowings secured by GNMA Mortgage-Backed Securities.
The value of the FHA-Insured Loans and the GNMA Mortgage-Backed Securities
pledged as collateral must equal at least 110% and 107%, respectively, of the
amounts borrowed. No more than 40% of the collateral pledged may be FHA-Insured
Loans and no less than 60% may be GNMA Mortgage-Backed Securities. CRIIMI MAE
was required to pay commitment fees of three basis points per month on the
unutilized amount through June 1994 and twelve basis points on any remaining
unused amounts as of July 1, 1994. For the year ended December 31, 1994, CRIIMI
MAE incurred approximately $415,000 in commitment fees related to the $150.0
million facility.
As of December 31, 1994, CRIIMI MAE had borrowed approximately $457.0
million of the funds available under the Master Repurchase Agreements primarily
to acquire Government Insured Multifamily Mortgages and to repay a portion of
borrowings under the Commercial Paper Facility, as discussed below. As of
December 31, 1994, mortgage investments directly owned by CRIIMI MAE, which
approximate $499.1 million at fair value, were used as collateral pursuant to
certain terms of the Master Repurchase Agreements.
On January 23, 1995, approximately $126 million of borrowings
collateralized with FHA-Insured Loans were paid off, terminating the related FHA
portion of the Master Repurchase Agreements. Replacement financing was obtained
from GACC through a master repurchase agreement at substantially similar terms,
except as related to collateral requirements, as discussed below.
COMMERCIAL PAPER FACILITY/REVOLVING CREDIT FACILITY
In the first quarter of 1994, borrowings under the Commercial Paper
Facility, which matured on February 28, 1994, were replaced with revolving
credit loans. During the period January 1, 1994 through February 28, 1994, the
maximum amount outstanding on these borrowings was approximately $95.3 million
and the weighted average amount outstanding was approximately $86.4 million.
The weighted average interest rate for the period January 1, 1994 through
February 28, 1994 on these borrowings was 5.3%, including all hedging and
borrowing costs.
In February 1993, CRIIMI MAE entered into an agreement to replace a $190.0
million letter of credit which provided the credit enhancement for the
Commercial Paper Facility and related revolving credit facility, with two
letters of credit in the amount of $35.0 million and $155.0 million provided by
National Australia Bank, Limited and Canadian Imperial Bank of Commerce (CIBC),
respectively. In April 1993, the letter of credit provided by CIBC was reduced
to $105.0 million. In January 1994,
<PAGE>
96
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
the special purpose corporation replaced borrowings under the Commercial Paper
Facility with revolving credit loans. These revolving credit loans were
originally scheduled to mature on January 28, 1994; however, the maturity date
was extended until February 28, 1994.
As of February 28, 1994, these borrowings were replaced with a non-
amortizing revolving credit facility, maturing August 28, 1996 (the Revolving
Credit Facility) provided by certain lenders which had participated in the
Commercial Paper Facility. Under the Revolving Credit Facility, the lenders
agreed to loan CRIIMI MAE an aggregate principal amount of $110 million.
Effective August 5, 1994, an additional $25 million was made available for
borrowing by CRIIMI MAE under this facility. CRIIMI MAE was required to pay
commitment fees of twenty five basis points per annum on the $25 million
increase to the facility. As of December 31, 1994, CRIIMI MAE incurred
approximately $33,000 of commitment fees related to the $25 million increase in
the facility.
The interest rate on borrowings under the Revolving Credit Facility is
based on CRIIMI MAE's choice of (i) the one, two, three or six-month LIBOR plus
an interest rate margin of .50%, .5625%, or .625% depending on the percentage of
GNMA Mortgage-Backed Securities pledged as collateral or (ii) a base rate equal
to the higher of either the lender's prime rate or .50% per annum above the
Federal Funds rate, plus an interest rate margin of 0%, .0625%, or .125%
depending on the percentage of GNMA Mortgage-Backed Securities held as
collateral. The rate on substantially all of this facility as of December 31,
1994 was 5.69%, which is based on 6 month LIBOR and a spread of .50%. This
rate was set on August 5, 1994 and reset on February 2, 1995 at 6.75%, which is
based on one month LIBOR and a spread of .625%.
The value of the collateral pledged must equal at least 110% of the amounts
borrowed. No more than 60% of the collateral pledged may be FHA-Insured Loans
and no less than 40% may be GNMA Mortgage-Backed Securities. As of December 31,
1994, mortgage investments directly owned by CRIIMI MAE, which approximated
$135.3 million at fair value, were used as collateral pursuant to the terms of
the Revolving Credit Facility.
The Revolving Credit Agreement also requires a minimum Fixed Charge
Coverage Ratio, as defined in the amended agreement, of 1.35 to 1.0 for any
fiscal quarter through September 30, 1995 and a minimum of 1.4 to 1.0 for any
fiscal quarter after September 30, 1995. For the quarter ended December 31,
1994, the Fixed Charge Coverage Ratio was 1.56:1.0.
As of December 31, 1994, CRIIMI MAE had used $115 million under the
Revolving Credit Facility primarily to acquire Government Insured Multifamily
Mortgages, other mortgage investments and to repay borrowings under the
aforementioned Commercial Paper Facility. On January 27, 1995, CRIIMI MAE made
<PAGE>
97
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
a $50 million payment on the Revolving Credit Facility to effect a permanent,
required reduction in the amount available under the facility. Replacement
financing in the amount of $50 million was obtained from GACC at terms
substantially similar to those on the Master Repurchase Agreements.
BANK TERM LOAN
On October 23, 1991, CRIIMI MAE entered into a credit agreement with two
banks for a reducing term loan facility (the Bank Term Loan) in an aggregate
amount not to exceed $85.0 million, subject to certain terms and conditions. In
December 1992, the credit agreement was amended to increase the Bank Term Loan
by $15.0 million. The Bank Term Loan had an outstanding principal balance of
approximately $52.0 million and approximately $30.4 million as of December 31,
1993 and 1994, respectively. As of December 31, 1993 and 1994, the Bank Term
Loan was secured by the value of 13,874,000 and 13,124,000 CRI Liquidating
shares owned by CRIIMI MAE, respectively, based on a current requirement that
collateral valued at 200% of the outstanding balance secure the loan. The Bank
Term Loan requires a quarterly principal payment based on the greater of (i) the
return of capital portion of the dividend received by CRIIMI MAE on its CRI
Liquidating shares securing the Bank Term Loan or (ii) an amount to bring the
Bank Term Loan to its scheduled outstanding balance at the end of such quarter.
The current minimum amount of annual principal payments is approximately $15.8
million, with any remaining amounts of the original $85.0 million of principal
due in April 1996 and any remaining amounts of the $15.0 million of increased
principal due in December 1996.
The Bank Term Loan currently provides for an interest rate of 1.10% over
three-month LIBOR plus an agent fee of 0.05% per year. As of December 31, 1994,
the interest rate, including the applicable spreads was 7.666%. The rate will
reset on March 31, 1995.
CRIIMI MAE is in the process of refinancing the facility with one lender
with more favorable terms including an interest rate based on .75% over CRIIMI
MAE's choice of one, two or three month LIBOR and collateral requirements of
175% of the loan amount. This refinancing is anticipated to occur
simultaneously with the paydown of approximately $17.4 million which is expected
to be made in March 1995 from the return of capital from Liquidating.
<PAGE>
98
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
OTHER REPURCHASE AGREEMENTS
CRIIMI MAE financed between 70% and 80% of the purchase price of the BB
rated and B rated tranches of subordinated securities which were purchased
during the third and fourth quarters of 1994. The following table summarizes
the financing related to these investments.
<TABLE>
<CAPTION>
Current
Rate
Amount % of Purchase Base (including
Pool Tranche Financed Price Financed Rate Spread Spread) Term
- ---- ------- ------------ -------------- -------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MC-1 B-1 $ 6,785,396 70% 1M LIBOR 125 7.25% 1 Month (1)
MC-1 B-2 5,396,106 70% 6M LIBOR 110 6.41% 6 Months(2)
C-1 D 7,544,577 80% 6M LIBOR 100 7.75% 6 Months(2)
C-1 E 5,165,704 70% 6M LIBOR 110 7.85% 6 Months(2)
-----------
$24,891,783
===========
<FN>
(1) Financing was replaced on January 30, 1995 in the amount of $7,754,739
representing 80% of the purchase price at an initial rate of 7.75% (6 month
LIBOR plus 100 basis points) with an initial term of six months with a
cancellation notification period of six months and several six month
renewals.
(2) These facilities have an initial term of six months, cancellation
notification periods ranging from six months to one year and with several
six month renewals.
</TABLE>
As a requirement under certain of CRIIMI MAE's other debt facilities,
financings related to repurchase agreements associated with the purchase of
subordinated securities are limited to no more than $50 million without the
approval of the lenders under the Master Repurchase Agreement, the Revolving
Credit Agreement and the GACC master repurchase agreement.
MASTER REPURCHASE AGREEMENT WITH GACC
On January 23, 1995, CRIIMI MAE entered into a master repurchase agreement
with GACC which provided CRIIMI MAE with $300 million of available financing
through April 1, 1996. Interest on such borrowings is based on one month LIBOR
plus .75% or .50% depending on whether FHA-Insured Loans or GNMA Mortgage-Backed
Securities, respectively, are pledged as collateral. Generally, the value of
the FHA-Insured Loans or GNMA Mortgage-Backed Securities pledged as collateral
must equal at least 105% of the amounts outstanding and no more than 60% of the
collateral pledged may be FHA-Insured Loans and no less than 40% may be GNMA
Mortgage-Backed Securities.
As previously discussed, approximately $176 million was borrowed from this
facility in January 1995 to paydown the portion of the borrowings secured by
FHA-Insured Loans under the Master Repurchase Agreements and to effect a $50
million required, permanent reduction the Revolving Credit Facility. The
weighted average rate on these borrowings, including applicable spreads, was
6.70%.
<PAGE>
99
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
WORKING CAPITAL LINE OF CREDIT
CRIIMI MAE is in the process of finalizing a $10 million working capital
line of credit with Riggs National Bank. This line of credit will be secured by
shares of CRI Liquidating valued at approximately 175% of any outstanding
borrowings. At CRIIMI MAE's option, the interest rate will be set on the
outstanding borrowings at one, two or three month LIBOR plus .60%, the daily
federal funds rate plus .80% or prime minus 1.0%.
Certain of the financial covenants under the line of credit will be
consistent with those of the other debt facilities discussed above.
OTHER DEBT RELATED INFORMATION
During December 1994, CRIIMI MAE negotiated with its lenders to amend debt
agreements to provide for more flexibility in the restrictive covenants. Under
all of CRIIMI MAE's existing debt facilities, as amended, except the Other
Repurchase Agreements, CRIIMI MAE's debt to equity ratio, as defined, may not
exceed 3.0:1.0. As of December 31, 1994, CRIIMI MAE's debt-to-equity ratio was
2.51:1.0. The weighted average cost of CRIIMI MAE's borrowings, including
amortization of deferred financing fees of $5.5 million for the year ended
December 31, 1994, was approximately 7.01%.
Certain of the debt agreements require that a minimum level of unencumbered
assets be maintained, the most restrictive of which requires 2% of total
indebtedness be maintained by CRIIMI MAE. As of January 24, 1995, CRIIMI MAE
had approximately $38 million, at management's estimated fair value, of
unencumbered FHA/GNMA Mortgage Investments. Additionally, CRIIMI MAE has other
unencumbered assets (which in some cases are subject to certain lender
eligibility requirements) including, but not limited to cash, working capital
lines of credit and unencumbered CRI Liquidating stock.
Fluctuations in interest rates impact the value of CRIIMI MAE's mortgage
investments as well as the potential returns to shareholders through increased
cost of funds. Increases in long-term rates could decrease the value of
mortgage investments and, in certain circumstances, require CRIIMI MAE to pledge
additional collateral in connection with its borrowing facilities. This would
reduce CRIIMI MAE's borrowing capacity and, in certain circumstances, could
force CRIIMI MAE to liquidate a portion of its assets at a loss in order to
comply with certain covenants under its borrowing facilities.
The Adviser is actively monitoring the levels of unencumbered collateral
and is taking steps to negotiate more favorable collateral requirements with
lenders. As discussed above, subsequent to year end, CRIIMI MAE executed a
master
<PAGE>
100
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
repurchase agreement with GACC for maximum borrowings of $300 million secured by
FHA-Insured Loans and GNMA Mortgage-Backed Securities valued at approximately
105% of the amounts borrowed. This compares to requirements under the Master
Repurchase Agreements with Nomura of 110% of the value on borrowings secured by
FHA-Insured loans and 105% or 107% on borrowings secured by GNMA Mortgage-Backed
Securities depending on whether the $350 million facility or the $150 million
facility was used and collateral requirements of 110% of the value on borrowings
under the Revolving Credit Facility.
The collateral requirements on the Bank Term Loan are also anticipated to
be reduced when the refinancing is completed after the March 31, 1995 required
principal payment is made from the return of capital on the shares of CRI
Liquidating stock pledged as collateral under the Bank Term Loan. The value of
the required collateral is anticipated to be reduced from 200% of the
outstanding borrowings to 175% of the outstanding borrowings. The Adviser has
also provided for more flexibility through the availability of a $10 million
working capital line of credit, secured by shares of CRI Liquidating stock,
expected to be closed in February 1995. The Adviser is also exploring financing
alternatives other than secured lending of the type currently in place.
A reduction in long-term interest rates could have the impact of increasing
the value of CRIIMI MAE's mortgage investments, lowering collateral
requirements, and could also increase the level of prepayments on CRIIMI MAE's
mortgage investments. CRIIMI MAE's yield on mortgage investments will be
reduced to the extent CRIIMI MAE reinvests the proceeds from such prepayments in
new mortgage investments with effective rates which are below the rates of the
prepaid mortgages. Offsetting this risk is the opportunity to invest the
proceeds from a prepayment into other higher yielding mortgage investments such
as the subordinated securities.
As previously discussed, the Adviser is actively pursuing a new investment
program in subordinated securities which it believes is, overall, less interest
rate sensitive than existing insured mortgage investments. The Adviser also
believes that if the proposed merger of CRIIMI MAE with CRI's Mortgage
Businesses is approved (see Note 1), CRIIMI MAE's overall return will be less
interest rate sensitive.
CRIIMI MAE has sought to enhance the return to its shareholders through the
use of leverage. Nevertheless, CRIIMI MAE's use of leverage carries with it the
risk that the cost of borrowings could increase without a corresponding increase
in the return on its mortgage investments, which could result in reduced net
income and thereby reduce the return to shareholders. To partially limit the
adverse effects of rising interest rates, CRIIMI MAE has entered into a series
of interest rate hedging agreements, as discussed in Note 11. The Adviser
continuously
<PAGE>
101
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Obligations under Financing Facilities - Continued
monitors CRIIMI MAE's outstanding borrowings and hedging techniques
in an effort to ensure that CRIIMI MAE is making optimal use of its borrowing
ability based on market conditions and opportunities.
11. Interest Rate Hedge Agreements
To partially limit the adverse effects of rising interest rates, CRIIMI MAE
has entered into a series of interest rate hedging agreements with an aggregate
notional amount of approximately $709 million at December 31, 1994, as follows:
<TABLE>
<CAPTION>
Hedging Notional
Instrument Amount Effective Date Maturity Date Floor Cap Index(c)
- ------------------- ------------ --------------- ---------------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Collar(e) $ 30,000,000 March 7, 1990 March 7, 1995 8.375% 10.125% CP
Collar(e) 20,000,000 March 30, 1990 March 30, 1995 8.375% 10.125% CP
Collar(e) 30,000,000 July 8, 1990 February 8, 1995 8.625% 10.625% CP
Accreting Collar(e) 35,000,000 July 9, 1990 July 9, 1995 8.750% 10.500% CP
Cap (b) 25,000,000 May 24, 1991 May 24, 1996 N/A 9.000% CP
Cap 25,000,000 June 17, 1991 June 17, 1996 N/A 8.450% CP
Cap (a) 50,000,000 June 25, 1993 June 25, 1998 N/A 6.50% 3M LIBOR
Cap (a) 50,000,000 July 1, 1993 June 3, 1996 N/A 6.50% 3M LIBOR
Cap (a) 50,000,000 July 20, 1993 July 20, 1998 N/A 6.25% 3M LIBOR
Cap (a) 50,000,000 August 10, 1993 August 10, 1997 N/A 6.00% 3M LIBOR
Cap (a) 50,000,000 August 27, 1993 August 27, 1997 N/A 6.125% 3M LIBOR
Cap (a) 50,000,000 November 10, 1993 November 10, 1997 N/A 6.00% 3M LIBOR
Cap (a) 35,000,000 February 2, 1994 February 2, 1999 N/A 6.125% 1M LIBOR
Cap (a) 50,000,000 March 15, 1994 March 15, 1997 N/A 6.375% 3M LIBOR
Cap (a) 50,000,000 March 25, 1994 March 25, 1998 N/A 6.50% 3M LIBOR
Cap (a) 50,000,000 October 7, 1994 October 7, 1997 N/A 6.75% 3M LIBOR
Cap (d) 33,385,131 December 31, 1991 March 31, 1996 N/A 6.50% 3M LIBOR
Cap (d) 6,451,291 January 15, 1993 March 29, 1996 N/A 6.50% 3M LIBOR
Cap (d) 18,614,868 December 31, 1991 March 31, 1996 N/A 10.50% 3M LIBOR
Cap (d) 1,048,709 March 31, 1993 December 31, 1996 N/A 10.50% 3M LIBOR
------------
$709,499,999
============
<FN>
(a) Approximately $4.5 million and $3.6 million of costs were incurred during
1993 and 1994, respectively, in connection with the establishment of
interest rate hedges. These costs are being amortized using the effective
interest method over the term of the interest rate hedge agreements for
financial statement purposes and in accordance with the regulations under
Internal Revenue Code Section 446 with respect to notional principal
contracts for tax purposes.
(b) On May 24, 1993, CRIIMI MAE and the counterparty to the collar, CIBC,
terminated the floor on this former collar. In consideration of such
termination, CRIIMI MAE paid CIBC approximately $2.3 million. This amount
was deferred on the accompanying consolidated balance sheets as the
underlying debt being hedged is still outstanding. This amount will be
amortized for the period from May 24, 1993 through May 26, 1996. CRIIMI
MAE amortized approximately $.5 million and $.8 million of this deferred
amount in the accompanying consolidated statements of income for the years
ended December 31, 1993 and 1994, respectively. Additionally, certain
costs incurred during 1991 in connection with an extinguishment of debt
which was financed with proceeds from a replacement facility, were deferred
and are being amortized using the effective interest method over the life
of the replacement facility. CRIIMI MAE amortized approximately $2.5
million and $1.6 million of such costs, during 1993 and 1994, respectively.
As of December 31, 1994, the unamortized balance of such costs was
approximately $630,000.
(c) The hedges are based either on the 30-day Commercial Paper Composite Index
(CP), three-month LIBOR, or one-month LIBOR.
(d) The notional amount of these hedges amortize based on the expected paydown
schedule of the Bank Term Loan. The average notional amount of these
hedges is expected to be $25,540,441, $3,383,118, $18,959,559 and
$2,710,633, respectively, during 1995.
(e) Total payments to the counterparty during 1993 and 1994 amounted to $8.2
million and $5.0 million, respectively, and were included in interest
expense in the accompanying consolidated Statements of Income.
</TABLE>
<PAGE>
102
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Interest Rate Hedge Agreements - Continued
INTEREST RATE COLLARS
Interest rate collars are hedging instruments that provide protection
within a range of interest rates, based on a readily determinable interest rate
index. When the interest rate index exceeds the cap then the counterparty pays
the difference between the index and the cap to CRIIMI MAE. Alternatively, if
the interest rate index is below the floor then CRIIMI MAE pays the difference
to the counterparty.
As of December 31, 1994, CRIIMI MAE had in place interest rate collars
based on the Federal Reserve 30 day Commercial Paper Composite Rate ("CP Index")
with an aggregate notional amount of $115 million, a weighted average floor of
8.55% and a weighted average cap of 10.37%. During 1993 and 1994, the CP Index
was below the floor resulting in CRIIMI MAE making payments to the counterparty.
These interest rate collars expire between February 1995 and July 1995. During
October 1994, the Adviser purchased a three year cap in the notional amount of
$50 million to replace certain of the expiring collars.
INTEREST RATE CAPS
Interest rate caps provide protection to CRIIMI MAE to the extent interest
rates, based on a readily determinable interest rate index, increase above the
stated interest rate cap. As of December 31, 1994, CRIIMI MAE had in place
interest rate caps aggregating $594.5 million based on the CP Index and LIBOR.
The caps that are based on the CP Index have an aggregate notional amount of $50
million at December 31, 1994, with a weighted average cap of 8.70%. The cap
that is based on the one month LIBOR has a notional amount of $35 million and a
cap rate of 6.125%. Those based on the three month LIBOR, have an aggregate
notional amount of $510 million at December 31, 1994, with a weighted average
cap rate of 6.51%. At December 31, 1994 the three month LIBOR of 6.5% was at or
exceeded the cap rate on caps with a notional amount of $440 million. These
caps will reset during the first quarter of 1995 and if rates stay at that level
or increase, CRIIMI MAE will receive payments based on the difference between
three month LIBOR and the cap. During 1994, the interest rate indices exceeded
the interest rate cap on one cap which reset in December, which had the result
of reducing CRIIMI MAE's overall interest expense by approximately $1,300.
CRIIMI MAE is exposed to credit loss in the event of nonperformance by the
counterparties to the interest rate hedge agreements should interest rates
exceed the caps. However, the Adviser does not anticipate nonperformance by any
of the counterparties, each of which has long-term debt ratings of A or above by
Standard and Poor's and A3 or above by Moody's.
Although CRIIMI MAE expects the overall average life of its mortgage
investments to exceed ten years, CRIIMI MAE's hedging
<PAGE>
103
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Interest Rate Hedge Agreements - Continued
agreements range in initial maturity from 3 to 5 years, principally because of
the high cost of hedging instruments with maturities greater than 5 years. As
of December 31, 1994, the average remaining term of these hedging agreements is
approximately 2.2 years. Because CRIIMI MAE's mortgage investments have fixed
interest rates, upon expiration of CRIIMI MAE's collar and cap agreements,
CRIIMI MAE will have interest rate risk to the extent interest rates increase on
its variable rate borrowings unless the hedges are replaced. The Adviser
continues to review its debt and asset/liability hedging techniques in order to
minimize the impact of interest rate risk.
12. Issuance of Stock
In March 1994, CRIIMI MAE completed a public offering of an additional
5,000,000 shares of common stock at a price to the public of $11.25 per share
(the Equity Offering). The net proceeds of the Equity Offering totaled
approximately $52.2 million, which CRIIMI MAE used primarily to acquire
Government Insured Multifamily Mortgages. The costs of the Equity Offering,
including professional fees, filing fees, printing costs and other items,
approximated $.7 million. Additionally, underwriting fees in an amount which
approximated 6.0% of the gross offering proceeds were incurred. These costs
were netted against the offering proceeds.
On June 23, 1994, CRIIMI MAE filed with the SEC a Shelf Registration
Statement on Form S-3 (Commission File No. 33-54267) in order to register for
sale Debt Securities, Preferred Shares and Common Shares of CRIIMI MAE to the
public in the aggregate principal amount of up to $200 million. CRIIMI MAE may
from time to time offer in one or more series the securities in amounts, at
prices and on terms to be set forth in supplements to the registration
statement. On November 3, 1994, CRIIMI MAE sold 500,000 shares of common stock,
which were formerly held in treasury, under the shelf registration statement at
an offering price of $8.744 per share. Net offering proceeds of approximately
$4.3 million were invested in subordinated securities. On December 30, 1994, in
conjunction with the payment of CRIIMI MAE's fourth quarter dividend, 42,446
shares of common stock were issued under the dividend reinvestment plan at a
price of $6.6885 per share. Additionally, on January 13, 1995, CRIIMI MAE sold
625,000 shares of common stock under the shelf registration statement at an
offering price of $6.867 per share for net proceeds of approximately $4.2
million. CRIIMI MAE intends to use the proceeds from this sale of securities to
acquire additional mortgage investments, sponsor and/or participate in
securitized mortgage programs, and to make other investments and acquisitions
relating to CRIIMI MAE's mortgage business.
<PAGE>
104
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Acquisition - AIM Funds Interest
Effective March 1, 1991, CRIIMI MAE entered into a Purchase Agreement dated
as of December 13, 1990 with Integrated and certain of its affiliates, and AIM
Acquisition Corporation to acquire certain of the interests of Integrated and
its affiliates in the AIM Funds sponsored by Integrated. On September 6, 1991,
CRIIMI, Inc. acquired all of the general partnership interests in the AIM Funds
for $23,342,591. In addition, CRIIMI MAE and CRI each invested $1,086,714 for
an aggregate 20% limited partnership interest in a limited partnership which
serves as the adviser to the AIM Funds. The remaining 80% of the adviser
partnership is owned by parties unrelated to CRIIMI MAE or CRI. The adviser
partnership entered into subadvisory agreements with an affiliate of CRI under
which such affiliate will perform certain services with respect to the mortgage
portfolios of the AIM Funds. For its investment, CRIIMI, Inc. will receive the
General Partner's share of income, loss and distributions (which ranges among
the AIM Funds from 2.9%-4.9%) from each fund and an affiliate of CRIIMI, Inc.
will receive certain expense reimbursements. CRIIMI MAE is guaranteed an annual
return on its investment in the adviser partnership, through the distributions
it receives indirectly from the adviser partnership and a right of offset
against amounts payable to its Adviser (see Note 3).
14. Settlement of Litigation
In connection with the settlement of certain class action litigation
involving CRIIMI MAE and certain of its affiliates, CRIIMI MAE entered into a
settlement agreement, (the Settlement Agreement) which was approved by the Court
on November 18, 1993, providing, among other things, for the issuance of up to
2.5 million warrants, exercisable for 18 months after issuance, to purchase
shares of CRIIMI MAE common stock at an exercise price of $13.17 per share. The
number of warrants to be issued was dependent on the number of class members who
submitted proof of claim forms by April 15, 1994. Based on the proofs of claim
submitted as of such date, CRIIMI MAE issued approximately 334,000 warrants
pursuant to the Settlement Agreement. In April 1994, CRIIMI MAE filed a
Registration Statement on Form S-3 (Commission File No. 33-53031) to register up
to 375,000 shares of CRIIMI MAE's common stock, issuable upon the exercise of
the warrants of CRIIMI MAE.
Based on the Adviser's initial estimate of the number of warrants to be
issued, CRIIMI MAE accrued a total provision of $1.5 million (which included the
uninsured portion of a cash payment of $250,000 made in connection with the
Settlement Agreement) in its consolidated statement of income for the year ended
December 31, 1993. Because the actual number of warrants issued pursuant to the
Settlement Agreement was significantly lower than the initial estimate, CRIIMI
MAE reduced this provision in June 1994 to approximately $950,000.
<PAGE>
105
CRIIMI MAE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Settlement of Litigation - Continued
The exercise of the warrants will not result in a charge to CRIIMI MAE's
tax basis income. Further, the Adviser believes that the exercise of the
warrants will not have a material adverse effect on CRIIMI MAE's tax basis
income per share or annualized cash dividends per share because CRIIMI MAE will
invest the proceeds from any exercise of the warrants in accordance with its
investment policy to purchase Government Insured Multifamily Mortgages or other
authorized investments. However, in the case of a significant decline in the
yield on mortgage investments and a significant decrease in the Net Positive
Spread which CRIIMI MAE could achieve on its borrowings, the exercise of the
warrants may have a dilutive effect on tax basis income per share and cash
dividends per share. Receipt of the proceeds from the exercise of the warrants
will increase CRIIMI MAE's shareholders' equity.
<PAGE>
106
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
CRIIMI MAE
Name Position Principal Occupation
- ---------------------- --------------------- ---------------------------------------
<S> <C> <C>
William B. Dockser Chairman of the Board Chairman of the Board and Shareholder-
C.R.I., Inc.
H. William Willoughby Director, President President, Secretary, Director and
and Secretary Shareholder - C.R.I., Inc.
Garrett G. Carlson, Sr. Director Chairman of the Board-SCA Realty, Inc.;
President - Can American Realty
Corporation and Canadian Financial
Corporation
G. Richard Dunnells Director Partner - Holland & Knight
Robert F. Tardio Director Retired
Frederick J. Burchill Executive Vice President Senior Vice President - C.R.I., Inc.
Jay R. Cohen Executive Vice
President and Senior Vice President, Mortgages -
Treasurer C.R.I., Inc.
Cynthia O. Azzara Vice President and
Chief Financial Officer Vice President and Chief Financial Officer
</TABLE>
<PAGE>
107
The Annual Report to the Securities and Exchange Commission on Form 10-K is
available to Shareholders and may be obtained by writing:
Investor Services/CRIIMI MAE Inc.
C.R.I., Inc.
The CRI Building
11200 Rockville Pike
Rockville, Maryland 20852
CRIIMI MAE Inc. shares are traded on the New York Stock Exchange under the
symbol CMM.
<PAGE>
Exhibit 4(q)
<PAGE>
- --------------------------------------------------------------------------------
CRIIMI MAE INC.
------------------------------------------
REVOLVING CREDIT AGREEMENT
Dated as of February 28, 1994
------------------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY,
as Administrative Agent
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience only.
Page
----
Section 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . 1
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and Determinations and Other Definitional
Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
1.03 Types of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Commitments of Loans . . . . . . . . . . . . . . . . . . . . . . 18
2.01 Loans.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.02 Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.03 Changes of Commitments. . . . . . . . . . . . . . . . . . . . . . 19
2.04 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.05 Lending Offices . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.06 Several Obligations; Remedies Independent . . . . . . . . . . . . 20
2.07 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.08 Prepayments and Conversions or Continuations of Loans . . . . . . 21
2.09 Extension of Credit Termination Date. . . . . . . . . . . . . . . 21
Section 3. Payments of Principal and Interest . . . . . . . . . . . . . . . 22
3.01 Repayment of Loans. . . . . . . . . . . . . . . . . . . . . . . . 22
3.02 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4. Payments; Pro Rata Treatment; Computations; Etc. . . . . . . . . 23
4.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.02 Pro Rata Treatment. . . . . . . . . . . . . . . . . . . . . . . . 24
4.03 Computations. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.04 Minimum Amounts . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.05 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.06 Non-Receipt of Funds by the Administrative Agent. . . . . . . . . 26
4.07 Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . 26
Section 5. Yield Protection, Etc. . . . . . . . . . . . . . . . . . . . . . 28
5.01 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . 28
5.02 Limitation on Types of Loans. . . . . . . . . . . . . . . . . . . 30
5.03 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.04 Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . 30
5.05 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.06 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.07 Additional Action in Certain Events . . . . . . . . . . . . . . . 34
Section 6. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . 35
6.01 Initial Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.02 Initial and Subsequent Extensions of Credit . . . . . . . . . . . 37
-ii-
<PAGE>
Page
----
Section 7. Representations and Warranties . . . . . . . . . . . . . . . . . 37
7.01 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . 37
7.02 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . 37
7.03 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.04 No Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.05 Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.07 Use of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.08 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.09 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . 39
7.11 Public Utility Holding Company Act. . . . . . . . . . . . . . . . 39
7.12 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . 40
7.14 Subsidiaries, Etc.. . . . . . . . . . . . . . . . . . . . . . . . 40
7.15 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . 40
7.16 Accuracy of Representations and Warranties. . . . . . . . . . . . 40
7.17 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.18 Pari Passu. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.19 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.20 REIT Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.21 Compliance With Applicable Laws, Etc. . . . . . . . . . . . . . . 41
Section 8. Covenants of the Company . . . . . . . . . . . . . . . . . . . . 41
8.01 Financial Statements; Other Information . . . . . . . . . . . . . 41
8.02 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.03 Existence, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.04 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.05 Prohibition of Fundamental Changes. . . . . . . . . . . . . . . . 45
8.06 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.07 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . 46
8.08 Limitation on Indebtedness. . . . . . . . . . . . . . . . . . . . 47
8.09 Borrowing Base. . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.10 Minimum Consolidated Shareholders' Equity . . . . . . . . . . . . 47
8.11 Maximum Total Liabilities . . . . . . . . . . . . . . . . . . . . 47
8.12 Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . 47
8.13 Interest Rate Hedge Parameters. . . . . . . . . . . . . . . . . . 47
8.14 Investment Policy . . . . . . . . . . . . . . . . . . . . . . . . 48
8.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 48
8.16 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.17 Lines of Business . . . . . . . . . . . . . . . . . . . . . . . . 49
8.18 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . 49
8.19 Use of Proceeds; Unencumbered Assets. . . . . . . . . . . . . . . 50
8.20 Mortgage Investments. . . . . . . . . . . . . . . . . . . . . . . 50
8.21 Servicers and Mortgagees of Record. . . . . . . . . . . . . . . . 50
8.22 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . 50
8.23 Further Assurance . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 9. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . 51
-iii-
<PAGE>
Page
----
Section 10. The Administrative Agent. . . . . . . . . . . . . . . . . . . . 54
10.01 Appointment, Powers and Immunities . . . . . . . . . . . . . . . 54
10.02 Reliance by Administrative Agent . . . . . . . . . . . . . . . . 55
10.03 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
10.04 Rights as a Lender . . . . . . . . . . . . . . . . . . . . . . . 56
10.05 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 56
10.06 Non-Reliance on Administrative Agent and Other Lenders . . . . . 57
10.07 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.08 Resignation or Removal of Administrative Agent . . . . . . . . . 57
Section 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.01 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
11.03 Expenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.04 Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 60
11.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 60
11.06 Assignments and Participations . . . . . . . . . . . . . . . . . 60
11.07 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.08 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 62
11.10 Governing Law; Submission to Jurisdiction. . . . . . . . . . . . 62
11.11 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 63
11.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 63
SCHEDULE I - Commitments, Applicable Lending Offices and Addresses for
Notices
SCHEDULE II - Existing Interest Rate Hedge Agreements
SCHEDULE III - Subsidiaries
EXHIBIT A - Form of Note
EXHIBIT B - Form of Notice of Borrowing
EXHIBIT C - Form of Notice of Conversion or Continuation
EXHIBIT D - Form of Officer's Certificate
EXHIBIT E - Form of Opinion of Counsel to the Company
EXHIBIT F - Collateral Valuation Certificate
ANNEX 1 - Eligible Participation Schedule
ANNEX 2 - Mortgage-Backed Security Schedule
ANNEX 3 - Deposited Funds Schedule
EXHIBIT G - Unencumbered Asset Valuation Certificate
EXHIBIT H - Security Agreement
EXHIBIT I - Form of Lender Assignment Agreement
-iv-
<PAGE>
REVOLVING CREDIT AGREEMENT dated as of February 28, 1994 among: CRIIMI
MAE INC., a corporation duly organized and validly existing under the laws of
the State of Maryland (together with its successors and permitted assigns, the
"Company"); each of the financial institutions that is a signatory hereto
(together with its successors and permitted assigns, individually, a "Lender"
and, collectively, the "Lenders"); and CANADIAN IMPERIAL BANK OF COMMERCE, NEW
YORK AGENCY, as agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
The Company has requested that the Lenders make revolving credit loans
to it on a secured basis. The Lenders are willing to make such loans on the
terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
Section 1. DEFINITIONS AND ACCOUNTING MATTERS.
1.01 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings:
"AFFILIATE" shall mean any Person which directly or indirectly
controls, or is under common control with, or is controlled by, the Company. As
used in this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") shall mean possession, directly
or indirectly, of power to direct or cause the direction of management or
policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any event, any
Person which owns directly or indirectly 10% or more of the securities having
ordinary voting power for the election of directors or other governing body of a
corporation or 10% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person.
"ANCILLARY RIGHTS" shall mean, with respect to an Eligible Mortgage
Investment, all rights of the Company, including without limitation, rights
against the Servicer and the mortgagee of record thereof in respect of the
following:
(i) the promissory notes, or other instruments or agreements
evidencing or securing the indebtedness of obligors thereon, including,
without limitation, all mortgages, deeds to secure debt, trust deeds and
security agreements related thereto, all rights to payment thereunder,
including all Proceeds of Mortgage Dispositions thereunder, all rights in
the Complexes securing payment of the indebtedness of the obligors
thereunder, or which are the subject of such Eligible Mortgage Investments,
all rights under documents related thereto, such as guaranties
<PAGE>
and insurance policies (issued by governmental agencies or otherwise),
including, without limitation, mortgage and title insurance policies, and
fire and extended coverage insurance policies (including the right to any
return premiums), and all rights in cash deposits consisting of impounds,
security deposits, insurance premiums or other funds held on account
thereof;
(ii) all rights to service, administer and/or collect the Eligible
Mortgage Investments specified in clause (i) above at any date, all rights
to the payment of money on account of such servicing, administration or
collection activities and all rights under any Participation Agreements and
Servicing Agreements with respect to the Eligible Mortgage Investments;
(iii) all accounts, contract rights and general intangibles
constituting or relating to any of the items referred to in clauses (i) and
(ii) above; and
(iv) all files, documents, instruments, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records and other books, records, information and data relating
to the items referred to in clauses (i) through (iii) above (including all
information, records, data, programs, tapes, discs and cards necessary or
helpful in the administration or servicing of the Eligible Mortgage
Investments).
"APPLICABLE LAWS" shall mean all applicable laws and treaties,
judgments, decrees, injunctions, writs and orders of any court, arbitrator or
governmental agency or authority and rules, regulations, orders, licenses and
permits of any governmental body, instrumentality, agency or authority (and
"Applicable Law" means any of the foregoing).
"APPLICABLE LENDING OFFICE" shall mean, for each Lender and for each
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan on Schedule I or such other office of
such Lender (or of an affiliate of such Lender) as such Lender may from time to
time specify to the Administrative Agent and the Company as the office by which
its Loans of such Type are to be made and maintained.
"APPLICABLE MARGIN" shall mean, at any time, with respect to each Type
of Loan, the rate per annum set forth below opposite the ratio (expressed as a
percentage) of the aggregate Loan Value of U.S. Mortgage-Backed Securities (as
set forth in, and as of the date of, the most recent Collateral Valuation
Certificate delivered pursuant to Section 6 or Section 8 or under the Security
Agreement) to the aggregate Loan Value of Qualified Investments (as set forth in
the most recent Collateral Valuation
-2-
<PAGE>
Certificate delivered pursuant to Section 6 or Section 8 or under the Security
Agreement):
<TABLE>
<CAPTION>
Ratio of U.S. Mortgage-
Backed Securities Applicable Applicable
to Qualified Margin for Margin for
Investments LIBOR Loans Base Rate Loans
----------------------- ----------- ---------------
<S> <C> <C>
60% or more .5% per annum 0% per annum
50% or more, but .5625% per annum .0625% per annum
less than 60%
less than 50% .625% per annum .125% per annum
</TABLE>
; PROVIDED, that nothing set forth above shall be deemed to limit the
requirement in Section 8.09 that the Loan Value of U.S. Mortgage-Backed
Securities constitute at least 40% of the aggregate Loan Value of all Qualified
Investments.
"ASSIGNED COLLATERAL" shall have the meaning assigned to that term in
Section 4.1 of the Security Agreement.
"AVAILABLE COMMITMENT" shall mean, with respect to each Lender, the
lesser of (i) such Lender's Commitment and (ii) such Lender's Commitment
Percentage of the Borrowing Base as set forth in the most recent Collateral
Valuation Certificate delivered pursuant to Section 6 or Section 8 or under the
Security Agreement.
"BASE RATE" shall mean, for any day, the higher of (a) the Federal
Funds Rate for such day plus 1/2 of 1% per annum and (b) the Prime Rate for such
day. Each change in any interest rate provided for herein based upon the Base
Rate resulting from a change in the Base Rate shall take effect at the time of
such change in the Base Rate.
"BASE RATE LOANS" shall mean Loans which bear interest at rates based
upon the Base Rate.
"BASIC DOCUMENTS" shall mean, collectively, this Agreement, the
Security Agreement, the Notes and all other documents executed and delivered by
the Company in connection herewith or therewith, including all amendments,
modifications and supplements of or to all such documents.
"BORROWING BASE" shall mean, at any time, the amount equal to the
quotient of (i) the aggregate Loan Value of the Assigned Collateral in the
possession of the Collateral Agent as set forth in the most recent Collateral
Valuation Certificate delivered pursuant to Section 6 or Section 8 or under the
Security Agreement and (ii) 1.10; PROVIDED, that in determining the aggregate
Loan Value of the Assigned Collateral, Qualified
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Investments other than U.S. Mortgage-Backed Securities, shall be included in
clause (i) above only to the extent that the Loan Value thereof does not
constitute more than 60% of the aggregate Loan Value of all such Qualified
Investments so included; PROVIDED, FURTHER, that in determining the aggregate
Loan Value of the Assigned Collateral, those Eligible Participations that relate
to mortgage loans insured by the FHA shall be included in clause (i) above only
to the extent that the Loan Value thereof does not exceed 60% of the aggregate
Loan Value of all Qualified Investments included.
"BUSINESS DAY" shall mean any day on which commercial banks are not
authorized or required to close in New York City and, if such day relates to a
borrowing of, a payment or prepayment of principal of or interest on, or a
Conversion of or into, or an Interest Period for, a LIBOR Loan or a notice by
the Company with respect to any such borrowing, payment, prepayment, Conversion
or Interest Period, which is also a day on which dealings in Dollar deposits are
carried out in the London interbank market.
"CAPITAL LEASE OBLIGATIONS" shall mean, for any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal Property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CASH COLLATERAL ACCOUNT" shall have the meaning set forth in Section
5.1 of the Security Agreement.
"CERTIFICATE OF PARTICIPATION" shall mean a certificate issued by the
Servicer or mortgagee of record of an underlying Eligible Mortgage Investment
evidencing the Company's undivided beneficial ownership in the Eligible Mortgage
Investment and the Company's Ancillary Rights with respect thereto.
"CIBC" shall mean Canadian Imperial Bank of Commerce, New York Agency.
"CLOSING DATE" shall mean the date upon which the conditions precedent
to the initial Loan hereunder set forth in Section 6 have been satisfied and the
initial extension of credit hereunder made.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
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"COLLATERAL AGENT" shall mean Chemical Bank, together with any
successor or assignee, as collateral agent pursuant to the Security Agreement.
"COLLATERAL VALUATION CERTIFICATE" shall mean a certificate in the
form of Exhibit F by which the Company reports the Loan Value of the Assigned
Collateral in the possession of the Collateral Agent.
"COMMITMENT" shall mean, for each Lender, the amount set opposite the
name of such Lender on Schedule I under the caption "Commitment" or, in the case
of a Lender that becomes a Lender pursuant to an assignment, the amount of the
portion of the assignor's Commitment assigned to such Lender (as the same may be
reduced from time to time pursuant to Section 2.03). The aggregate amount of
the Commitments on the date hereof is $110,000,000.
"COMMITMENT PERCENTAGE" shall mean, for each Lender, the percentage
that such Lender's Commitment represents of the aggregate amount of all
Commitments at such time.
"COMPLEX" shall mean a multifamily, residential, rental apartment or
townhouse development which has been constructed, renovated or rehabilitated
pursuant to various government assistance programs directed by HUD under
authority of the National Housing Act, which are encumbered pursuant to a
Mortgage Investment.
"CONSOLIDATED SUBSIDIARY" shall mean, for any Person, each Subsidiary
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"CONSOLIDATED SHAREHOLDERS' EQUITY" shall mean, at any time, all
amounts which would be included under shareholders' equity on a consolidated
balance sheet of the Company and its Subsidiaries prepared in accordance with
GAAP and, including in any event, any preferred stock issued by the Company.
"CONTINUE", "CONTINUATION" and "CONTINUED" shall refer to the
continuation pursuant to Section 2.08 or 5.04 of a LIBOR Loan from one Interest
Period to the next Interest Period.
"CONVERT", "CONVERSION" and "CONVERTED" shall refer to a conversion
pursuant to Section 2.08 or 5.04 of Base Rate Loans into LIBOR Loans or of LIBOR
Loans into Base Rate Loans, which may be accompanied by the transfer by a Lender
(at its sole discretion) of a Loan from one Applicable Lending Office to
another.
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"CREDIT TERMINATION DATE" shall mean, for any Lender, August 28, 1996,
as the same may be (i) extended for such Lender pursuant to Section 2.09 or
(ii) shortened pursuant to Sections 2.03, 5.07(b) or 9; provided that, if the
Credit Termination Date would otherwise fall on a day that is not a Business
Day, the Credit Termination Date shall instead fall on the next preceding
Business Day.
"DEFAULT" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"DEPOSITED FUNDS" shall mean any funds deposited in the Cash
Collateral Account, as such funds may be invested from time to time, in
accordance with the terms of the Security Agreement.
"DISCOUNT MORTGAGE" shall mean a Federally Insured Mortgage which is
purchased at a price which is less than the outstanding principal balance of the
Federally Insured Mortgage and which is not a NPP Mortgage Investment.
"DIVIDEND PAYMENT" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company, but excluding dividends payable solely in shares
of common stock of the Company.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"ELECTING LENDER" shall have the meaning assigned to such term in
Section 9.
"ELIGIBLE MORTGAGE INVESTMENT" shall mean a Mortgage Investment with
respect to which each of the following statements shall be accurate and complete
in all respects:
(a) Said Mortgage Investment has a mortgagee of record approved by
HUD and is serviced by a Servicer pursuant to a Servicing Agreement.
(b) The obligations under said Mortgage Investment are either wholly
insured pursuant to a HUD Mortgage Insurance Program or wholly insured or
fully guaranteed by FNMA or FHLMC, such insurance or guarantee being in
full force and effect, and irrevocable as to the Company and its assigns
and there being no state of facts which could adversely affect the
availability or enforceability of said insurance or the collectibility
thereof by the Collateral Agent or the Lenders.
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(c) Said Mortgage Investment is not secured by properties owned by
CRI Insured Mortgage Associates Adviser Limited Partnership or its
affiliates.
"ELIGIBLE PARTICIPATION" shall mean the majority undivided beneficial
ownership interest of the Company in an Eligible Mortgage Investment and the
Company's Ancillary Rights with respect thereto and with respect to which each
of the following statements is true:
(a) Said ownership interest is evidenced by a Certificate of
Participation issued by the Servicer or mortgagee of record of the
underlying Eligible Mortgage Investment.
(b) Said ownership interest has not been assigned, pledged or
encumbered in any manner whatsoever, except as contemplated by the Security
Agreement.
(c) The Company effectively has the exclusive right to direct (i) the
Servicer to act in accordance with the terms of the related Servicing
Agreement and (ii) the mortgagee of record to act in accordance with the
terms of the related Participation Agreement.
(d) Said ownership interest may be assigned, pledged and transferred
to the Collateral Agent or the Lenders without the consent or approval of
any Person or any other restriction.
(e) Said ownership interest includes all of the benefits of insurance
or a guaranty provided by a HUD Mortgage Insurance Program.
"ENVIRONMENTAL LAWS" shall mean any and all Federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation or trade or business
which is a member of the same controlled group of
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corporations (within the meaning of Section 414(b) of the Code) as the Company
or is under common control (within the meaning of Section 414(c), (m) or (o) of
the Code) with the Company.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Section 9.
"EXISTING INTEREST RATE HEDGE AGREEMENT" shall mean each Interest Rate
Hedge Agreement listed on Schedule II, as amended, restated and supplemented
from time to time.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the next higher 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to CIBC on such day on such transactions as determined by the
Administrative Agent.
"FEDERALLY INSURED MORTGAGE" shall mean a first or second mortgage
lien on a property insured in whole or in part by HUD under Sections 207, 220,
221(d)(3), 221(d)(4), 223(f), 232, 236, 241, Title X or other similar sections
of the National Housing Act.
"FHA" shall mean the Federal Housing Administration, together with its
successors and assigns.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation, a
federally chartered corporation, together with its successors and assigns.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any fiscal quarter, the
ratio of (i) net income of the Company and its Subsidiaries (calculated before
extraordinary items, taxes and the interest expenses specified in clause (ii)
hereof) for such fiscal quarter to (ii) the aggregate amount of interest accrued
on all Indebtedness of the Company and its Subsidiaries for such fiscal quarter.
"FNMA" shall mean the Federal National Mortgage Association, a
federally chartered corporation, together with its successors and assigns.
"GAAP" shall mean generally accepted accounting principles applied on
a basis consistent with those which, in
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accordance with the last sentence of Section 1.02(a), are to be used in making
the calculations for purposes of determining compliance with the terms of this
Agreement.
"GNMA" shall mean the Government National Mortgage Association, a
federally chartered corporation, together with its successors and assigns.
"GUARANTEE" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of his,
her or its obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
have a correlative meaning.
"HUD" shall mean the United States Department of Housing and Urban
Development, together with its successors and assigns, acting through any
authorized representative.
"HUD MORTGAGE INSURANCE PROGRAM" shall mean any federal mortgage
insurance program pursuant to which Federally Insured Mortgages are issued.
"INDEBTEDNESS" shall mean, for any Person: (a) indebtedness created,
issued or incurred by such Person for borrowed money (whether by loan or the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Lien on the Property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for account of such Person;
(e) Capital Lease Obligations of such
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Person; (f) Indebtedness of others Guaranteed by such Person; and (g) any
obligations under any Interest Rate Hedge Agreement.
"INTEREST PERIOD" shall mean, with respect to any LIBOR Loan, each
period commencing on the date such LIBOR Loan is made or Converted from a Loan
of another Type or the last day of the next preceding Interest Period for such
Loan and ending on the numerically corresponding day in the first, second, third
or sixth calendar month thereafter, as the Company may select as provided in
Section 4.05, except that each Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any LIBOR Loan
would otherwise end after the Credit Termination Date, such Interest Period
shall end on the Credit Termination Date; (ii) each Interest Period which would
otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day (or if such next succeeding Business Day falls in the
next succeeding calendar month, on the next preceding Business Day); and (iii)
notwithstanding clause (i) above, no Interest Period shall have a duration of
less than one month and, if the Interest Period for any LIBOR Loan would
otherwise be a shorter period, such Loan shall not be available hereunder.
"INTEREST RATE HEDGE AGREEMENT" shall mean an interest rate hedge
agreement which is a rate swap agreement, forward rate agreement, interest rate
option, rate cap agreement, rate floor agreement, rate collar agreement,
accreting collar agreement, or any other similar agreement (including any option
to enter into, any combination of, or any master agreement for, any of the
foregoing) between the Company and one or more other parties providing for the
exchange of nominal interest obligations between the Company and such financial
institutions, as said agreement or arrangement shall be modified and
supplemented and in effect from time to time.
"LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT" shall mean the Amended
and Restated Letter of Credit and Reimbursement Agreement dated as of February
9, 1993, as amended by the Extension and Amendment Agreement dated as of
January 25, 1994, between CRI Funding Corporation and the Banks named therein
and CIBC, as agent.
"LIBO RATE" shall mean, with respect to any LIBOR Loan for any
Interest Period therefor, the rate per annum determined by the Administrative
Agent to be equal to the quotient of (y) the arithmetic mean (rounded upwards,
if necessary, to the nearest 1/16 of 1%) of the offered rates for deposits in
Dollars having a term comparable to such Interest Period and in an amount
comparable to the principal amount of such LIBOR Loan for such Interest Period,
which appear on the Screen Page as of 11:00 a.m.
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London time (or as soon thereafter as practicable) commencing on the date two
Business Days prior to the first day of such Interest Period, divided by (z) a
number equal to 1 minus the Reserve Requirement (rounded upwards, if necessary,
to the next higher 1/16 of 1%). If fewer than two offered rates appear on all
of the displays referred to as the Screen Page, the rate for purposes of clause
(y) above for that Interest Period will be determined on the basis of the rates
at which deposits in Dollars are offered by CIBC at approximately 10:00 a.m. New
York City time (or as soon thereafter as practicable) on the date two Business
Days prior to the first day of such Interest Period.
"LIBOR LOANS" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in the definition of "LIBO Rate" in
this Section 1.01.
"LIEN" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property (including an agreement to give any of the foregoing). For purposes of
this Agreement, the Company or any of its Subsidiaries shall be deemed to own
subject to a Lien any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement (other than an operating lease)
relating to such Property.
"LOAN VALUE" shall mean on the date any determination thereof is to be
made, as follows:
(i) with respect to an Eligible Participation, the market value of
such Eligible Participation, as determined by a written quotation made by a
nationally recognized investment banking firm or mortgage appraisal firm
with expertise in valuing interests in mortgages of the type represented by
Eligible Mortgage Investments on the date of such determination (any such
dealer certified by the Company to and approved by the Administrative
Agent); PROVIDED, HOWEVER, that, in any period of four consecutive weeks,
no two such weekly quotations shall be obtained from the same firm, unless
the Company shall notify the Administrative Agent that such quotations are
not available from another dealer and the Administrative Agent consents to
a waiver thereof; PROVIDED, FURTHER, that, notwithstanding anything to the
contrary contained herein and provided no Default or Event of Default shall
have occurred and be continuing and no Termination Notice shall have been
delivered or deemed delivered hereunder, in any such period of four
consecutive weeks, one such quotation may be prepared by the Company.
(ii) with respect to a Mortgage-Backed Security, the market value of
such Mortgage-Backed Security as determined by the closing daily bid
quotation made by a recognized
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dealer in such Mortgage-Backed Securities on the date of such determination
(any such dealer certified by the Company to and approved by the
Administrative Agent); PROVIDED, HOWEVER, that, in any period of four
consecutive weeks, no two such weekly quotations shall be obtained from the
same dealer, unless the Company shall notify the Administrative Agent that
such quotations are not available from another dealer and the
Administrative Agent consents to a waiver thereof; PROVIDED, FURTHER, that,
notwithstanding anything to the contrary contained herein and provided no
Default or Event of Default shall have occurred and be continuing and no
Termination Notice shall have been delivered hereunder, one such quotation
may be prepared by the Company; PROVIDED, FURTHER, that (a) no amortizing
Mortgage-Backed Security with respect to which notice of prepayment has
been received shall be assigned a Loan Value higher than par value and
(b) no Mortgage-Backed Security with respect to which notice of redemption
or call has been received shall be assigned a Loan Value higher than the
lowest redemption or call price applicable to such Mortgage-Backed Security
during the 21 days next succeeding the date of determination; and
(iii) with respect to the Deposited Funds, the sum of (a) the
aggregate amount of cash funds on deposit in the Cash Collateral Account at
such date and (b) ninety-six percent (96%) of the par value of Permitted
Investments thereof.
"LOANS" shall mean the loans provided pursuant to Section 2.01.
"MAJOR DEFAULT" shall mean an Event of Default described in
Section 9(a), 9(d)(i), 9(d)(ii) (to the extent such Event of Default arises from
the failure of the Company to perform or observe the covenants contained in
Sections 8.09, 8.10, 8.11 or 8.12), 9(f), 9(g), 9(i), 9(j) or 9(k).
"MARGIN STOCK" shall mean margin stock within the meaning of
Regulations U and X.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a)
the Property, business, operations, financial condition, liabilities or
capitalization of the Company individually or the Company and its Subsidiaries
taken as a whole, (b) the ability of the Company to perform its obligations
under any of the Basic Documents, (c) the validity or enforceability of any of
the Basic Documents, (d) the rights and remedies of the Lenders, the
Administrative Agent or the Collateral Agent under any of the Basic Documents,
(e) the timely payment of the principal of or interest on the Loans or other
amounts payable in connection therewith or (f) the Assigned Collateral or the
validity, perfection or priority of the security interest of the Collateral
Agent therein.
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"MORTGAGE-BACKED SECURITY" shall mean any mortgage-backed security
backed by United States government agencies or United States government-
sponsored agencies issued by an entity other than the Company or an affiliate of
the Company.
"MORTGAGE DISPOSITIONS" shall mean prepayments (in whole or in part),
sales, exchanges, foreclosures, condemnations or any other dispositions of
Mortgage Investments.
"MORTGAGE INVESTMENTS" shall mean NPP Mortgage Investments, Discount
Mortgages and other mortgage investments invested in by the Company.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which the Company or any ERISA Affiliate is
obligated to make, or has been obligated to make within the preceding six years,
contributions and which is covered by Title IV of ERISA.
"NATIONAL HOUSING ACT" shall mean the National Housing Act of 1934, as
amended.
"NOMURA FACILITIES" shall mean each Committed Master Repurchase
Agreement and Committed Master Repurchase Agreement Governing Purchases and
Sales of Participation Certificates between Nomura Securities International,
Inc. and the Company and between Nomura Asset Capital Corporation and the
Company, respectively, each set of which is dated as of April 30, 1993 and
November 30, 1993.
"NON-U.S. LENDER" shall mean any Lender which is not organized under
the laws of the United States of America or any State thereof or the District of
Columbia.
"NOTES" shall mean the promissory notes provided pursuant to Section
2.07.
"NPP MORTGAGE INVESTMENT" or "NEAR PAR" or "PREMIUM MORTGAGE
INVESTMENT" shall mean a Federally Insured Mortgage which is purchased at a
price which is near to, equal to or greater than the outstanding principal
balance of the Federally Insured Mortgage.
"OBLIGATIONS" shall have the meaning assigned to that term in Section
2.1 of the Security Agreement.
"OUTSTANDING" shall mean all Loans made by a Lender pursuant to this
Agreement less the principal amount of Loans which have been paid in full.
"PARTICIPANT" shall have the meaning set forth in Section 11.06.
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"PARTICIPATION AGREEMENT" shall mean with respect to an Eligible
Participation, a participation agreement between the Company and the mortgagee
of record with respect to the related Eligible Mortgage Investment, as the same
from time to time may be extended, amended, supplemented, waived or modified and
in effect.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity Succeeding to any or all of its functions under ERISA.
"PERMITTED INVESTMENTS" shall have the meaning assigned to that term
in Section 5.4 of the Security Agreement.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government (or any agency, instrumentality or political subdivision thereof).
"PLAN" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any
Loan or any other amount under this Agreement or any Note that is not paid when
due (whether at stated maturity, by acceleration or otherwise), a rate per annum
during the period from and including the due date to but excluding the date on
which such amount is paid in full equal to 1% above the sum of (i) the Base Rate
and (ii) the Applicable Margin for Base Rate Loans, in each case as in effect
from time to time (provided that, if the amount so in default is principal of a
LIBOR Loan and the due date thereof is a day other than the last day of an
Interest Period therefor, the "Post-Default Rate" for such principal shall be,
for the period from and including such due date to but excluding the last day of
such Interest Period, 1% above the interest rate for such Loan as provided in
Section 3.02(b) and, thereafter, the rate provided for above in this
definition).
"PRIME RATE" shall mean the rate of interest from time to time
announced by CIBC as its prime commercial lending rate.
"PROCEEDS OF MORTGAGE DISPOSITIONS" shall mean receipts of the Company
arising from Mortgage Dispositions (including without limitation receipts of
insurance proceeds in connection with Mortgage Dispositions), reduced by the
following:
(i) amounts paid or to be paid in connection with, or as an expense
of, such Mortgage Disposition; and
(ii) any amount set aside for reserves.
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"PROPERTY" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"QUALIFIED INVESTMENTS" shall mean Eligible Participations and
Mortgage-Backed Securities.
"QUARTERLY DATES" shall mean the last day of March, June, September
and December in each year, the first of which shall be the first such day after
the date of this Agreement; provided that if any such day is not a Business Day,
then such Quarterly Date shall be the preceding Business Day.
"REGULATIONS D, U AND X" shall mean, respectively, Regulations D, U
and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be amended or supplemented from time to time.
"REGULATORY CHANGE" shall mean, with respect to any Lender, any change
after the date of this Agreement in United States Federal, state or foreign law
or regulations (including, without limitation, Regulation D) or the adoption or
making after such date of any interpretation, directive or request applying to a
class of banks including such Lender of or under any United States Federal,
state or foreign law or regulations (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REIT" shall mean a real estate investment trust as defined in
Sections 856 to 860, inclusive, of the Code.
"REQUIRED LENDERS" shall mean Lenders holding at least 66 2/3% of the
aggregate principal amount of the Loans or if no Loans shall be outstanding, at
least 66 2/3% of the aggregate amount of the Commitments, provided that for such
purpose there shall be excluded any Commitments or Loans directly or indirectly
held by the Company or any of its Affiliates following an assignment or
participation as contemplated by Section 11.06.
"RESERVE REQUIREMENT" shall mean, for any Interest Period for any
LIBOR Loan, the average maximum rate (expressed as a decimal) at which reserves
(including any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change against (i) any category of liabilities which
includes deposits by reference to which the
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LIBO Rate is to be determined as provided in the definition of "LIBO Rate" in
this Section 1.01 or (ii) any category of extensions of credit or other assets
which includes LIBOR Loans.
"SCREEN PAGE" shall mean (i) the display designated as page "LIBO" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
LIBO page on that service for the purposes of displaying London interbank
offered rates of major banks) or (ii) if fewer than two offered rates appear on
the display page in clause (i) above, the display designated as page "3750" on
the Dow Jones Telerate Service (or such other page as may replace page 3750 on
that service for the purpose of displaying London interbank offered rates of
major banks).
"SECURITY AGREEMENT" shall mean the Security Agreement among the
Collateral Agent, the Company and the Administrative Agent, in substantially the
form attached as Exhibit H, as the same from time to time may be extended,
amended, supplemented, waived or modified and in effect.
"SERVICER" shall mean a HUD approved servicer of a Mortgage
Investment.
"SERVICING AGREEMENT" shall mean with respect to an Eligible
Participation or an Eligible Mortgage Investment, a servicing agreement between
a Servicer and the mortgagee of record, as the same from time to time may be
extended, amended, supplemented, waived or modified and in effect.
"SIGNET CREDIT AGREEMENT" shall mean the Amended and Restated Credit
Agreement dated as of December 22, 1992 among Signet Bank/Virginia, Westpac
Banking Corporation and the Company.
"SUBSIDIARY" shall mean, for any Person, any corporation, partnership
or other entity of which at least a majority of the securities or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or
classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"TERMINATION NOTICE" shall have the meaning assigned to that term in
Section 9.
"TOTAL LIABILITIES" shall mean at any time all Indebtedness of the
Company and its Consolidated Subsidiaries and
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all other liabilities of the Company and its Subsidiaries which should be
classified as liabilities on a balance sheet of the Company and its Consolidated
Subsidiaries prepared in accordance with GAAP, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the respective goods are delivered or the respective
services are rendered.
"TYPE" shall have the meaning assigned that term in Section 1.03.
"UNENCUMBERED ASSETS" shall mean the Company's cash, Qualified
Investments, investments of the type permitted in Section 5.4 of the Security
Agreement and stock of CRI Liquidating REIT, Inc. which, in each case, are not
Assigned Collateral or subject to any other Lien whatsoever.
"UNENCUMBERED ASSET VALUATION CERTIFICATE" shall mean a certificate in
the form of Exhibit G by which the Company reports the Value of Unencumbered
Assets.
"U.S. MORTGAGE-BACKED SECURITY" shall mean a Mortgage-Backed Security
guaranteed by (i) GNMA pursuant to Section 306(g) of Title III of the National
Housing Act, (ii) an agency of the United States government entitled to the full
faith and credit of the United States government, or (iii) the United States
government.
"VALUE" shall mean, with respect to Unencumbered Assets, on the date
any determination thereof is to be made, the value determined as set forth in
the definition of the term "Loan Value" for Assigned Collateral of a similar
type, and, in the case of the stock of CRI Liquidating REIT, the market value
thereof as published in The Wall Street Journal (or any successor or, if there
is no successor, The New York Times) on such date.
"WHOLLY-OWNED SUBSIDIARY" shall mean any such Subsidiary of which all
of such securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are so owned or controlled.
1.02 ACCOUNTING TERMS AND DETERMINATIONS AND OTHER DEFINITIONAL
PROVISIONS.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, all calculations made for determining
compliance with the terms of this Agreement shall be made, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lenders hereunder shall be prepared, in accordance with
generally accepted accounting principles applied on a basis consistent with that
used in the preparation of the
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latest financial statements furnished to the Lenders hereunder (which, prior to
the first financial statements delivered under Section 8.01 shall mean the
financial statements referred to in Section 7.02).
(b) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8, the Company will not change the last
day of its fiscal year from December 31, or the last days of the first three
fiscal quarters in each of its fiscal years from March 31, June 30, and
September 30 of each year, respectively.
(c) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(d) The words "hereof", "hereto", "herein", and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; Section, Schedule
and Exhibit references contained in this Agreement are references to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" shall mean "including without limitation".
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
1.03 TYPES OF LOANS. Loans hereunder are distinguished by "Type".
The "Type" of a Loan refers to whether such Loan is a Base Rate Loan or a LIBOR
Loan, each of which constitutes a Type.
Section 2. COMMITMENTS OF LOANS.
2.01 LOANS. Each Lender severally agrees, on the terms of this
Agreement, to make Loans to the Company in Dollars during the period from and
including the date hereof to but not including the Credit Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount of the Available Commitment of such Lender as in effect from time to
time; PROVIDED that, at no time shall the aggregate amount of Loans Outstanding
exceed the Borrowing Base. Subject to the terms of this Agreement, during such
period the Company may borrow, repay and reborrow the amount of the Commitments
by means of Base Rate Loans and LIBOR Loans and may Convert Loans of one Type
into Loans of another Type (as provided in Section 2.08); PROVIDED, HOWEVER,
that the Company shall not be entitled to borrow, or Convert into, LIBOR Loans,
where such Loans, if made, would result in an aggregate of more than five
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separate LIBOR Loans of any Lender being Outstanding hereunder at any one time.
For purposes of the foregoing, Loans having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Loans.
2.02 BORROWINGS. The Company shall give the Administrative Agent
(which shall promptly notify the Lenders) notice of each borrowing hereunder as
provided in Section 4.05. Not later than 12:00 noon New York time on the date
specified for each borrowing hereunder, each Lender shall make available the
amount of the Loan to be made by it on such date to the Administrative Agent in
immediately available funds, for account of the Company. The amount so received
by the Administrative Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account designated by the Company.
2.03 CHANGES OF COMMITMENTS.
(a) The aggregate amount of the Commitments shall be automatically
reduced to zero on the Credit Termination Date.
(b) The Company shall have the right at any time or from time to time
(i) so long as no Loans are Outstanding, to terminate the Commitments and (ii)
to reduce the aggregate unused amount of the Commitments; provided that (x) the
Company shall give notice of each such termination or reduction as provided in
Section 4.05 and (y) each partial reduction shall be in an aggregate amount at
least equal to $10,000,000 and in multiples of $10,000,000 in excess thereof.
(c) The Commitments once terminated or reduced may not be reinstated
and, if terminated, no Lender shall have any further obligation to make any
Loans hereunder.
2.04 FEES.
(a) The Company shall pay to the Administrative Agent for account of
each Lender a commitment fee on the daily average unused amount of such Lender's
Commitments for the period from and including the date of this Agreement to but
not including the earlier of the date the Commitment of such Lender is
terminated or the Credit Termination Date, at a rate of 1/4 of 1% per annum.
Accrued commitment fee shall be payable in arrears on each Quarterly Date, on
the earlier of the date the Commitment of such Lender is terminated or the
Credit Termination Date and on the date of any reduction of such Commitment (to
the extent accrued and unpaid on the amount of the reduction).
(b) The Company shall pay to the Administrative Agent for account of
each Lender on the date hereof an up-front fee as set forth in the Commitment
Letter dated November 24, 1993 from
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the Administrative Agent to the Company, and the Administrative Agent shall
apply such fee for the account of each Lender according to the offering
memorandum from the Administrative Agent to the Lenders.
(c) The Company shall pay to the Administrative Agent, for its own
account, such fees as may be separately agreed between the Company and the
Administrative Agent, including the arrangement and administrative fees set
forth in the Commitment Letter dated November 24, 1993 from the Administrative
Agent to the Company.
2.05 LENDING OFFICES. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.06 SEVERAL OBLIGATIONS; REMEDIES INDEPENDENT. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender. The
amounts payable by the Company at any time hereunder and under the Notes to each
Lender shall be a separate and independent debt and each Lender shall be
entitled to protect and enforce its rights arising out of this Agreement and the
Notes, and it shall not be necessary for any other Lender or the Administrative
Agent to consent to, or be joined as an additional party in, any proceedings for
such purposes.
2.07 NOTES.
(a) The Loans made by each Lender shall be evidenced by a single
promissory note of the Company substantially in the form of Exhibit A, dated the
date hereof, payable to such Lender in a principal amount equal to the amount of
its Commitment as originally in effect and otherwise duly completed.
(b) The date, amount, Type, interest rate, and duration of Interest
Period (if applicable) of each Loan made by each Lender to the Company, and each
payment made on account of the principal thereof, shall be recorded by such
Lender on its books and, prior to any transfer of the Note evidencing the Loans
held by it, endorsed by such Lender on the schedule attached to such Note or any
continuation thereof; provided that the failure of such Lender to make any such
recordation or endorsement shall not affect the obligations of the Company to
make a payment when due of any amount owing under such Note.
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2.08 PREPAYMENTS AND CONVERSIONS OR CONTINUATIONS OF LOANS.
(a) Subject to Section 4.04, the Company shall have the right to
prepay Loans, or to Convert Loans of one Type into Loans of another Type or
Continue Loans of one Type as Loans of the same Type, at any time or from time
to time; PROVIDED, that (i) the Company shall give the Administrative Agent
notice of each such prepayment, Conversion or Continuation as provided in
Section 4.05, (ii) LIBOR Loans may be prepaid or Converted only on the last day
of an Interest Period for such Loans and (iii) Conversions of Base Rate Loans
into LIBOR Loans shall be subject to the proviso in the second sentence of
Section 2.01. Notwithstanding the foregoing, and without limiting the rights
and remedies of the Lenders under Section 9, in the event that any Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Required Lenders shall) suspend the right of the Company to
Convert any Loan into a LIBOR Loan, or to Continue any Loan as a LIBOR Loan, in
which event all Loans shall be Converted (on the last day(s) of the respective
Interest Periods therefor) or Continued, as the case may be, as Base Rate Loans.
(b) If at any time the sum of the aggregate principal amount of
Outstanding Loans shall exceed the Borrowing Base, the Company shall, subject to
any applicable cure period permitted by Section 7.2(c) of the Security
Agreement, immediately prepay the Loans, together with accrued interest, in an
amount necessary to eliminate such excess.
2.09 EXTENSION OF CREDIT TERMINATION DATE.
(a) The Company may by notice to the Administrative Agent (which
shall promptly deliver a copy thereof to each of the Lenders) not less than 90
days and not more than 120 days prior to the Credit Termination Date then in
effect, request that the Lenders extend for an additional twelve-month period
(i) the initial Credit Termination Date in effect hereunder and (ii) if such
initial Credit Termination Date is extended, the Credit Termination Date in
effect as a result of such extension. If the Required Lenders acting in their
sole discretion, by notice to the Administrative Agent on the date (the "Consent
Date") falling 30 days prior to the Credit Termination Date then in effect (or
if such day is not a Business Day, on the next succeeding Business Day), agree
to such request, then, effective as of the Consent Date, the Credit Termination
Date for such Lenders only shall be extended and become the date twelve months
subsequent to the Credit Termination Date then in effect; PROVIDED that such
extension shall not be effective unless (i) no Default or Event of Default shall
have occurred and be continuing on each of the date of the notice requesting
such extension and on the Consent Date (both prior to and after giving effect to
such extension); (ii) each of the representations and warranties of the Company
in
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Section 7 and in Section 3.1 of the Security Agreement shall be true and
complete on and as of each of the date of such notice and the Consent Date
(prior to giving effect to such extension) with the same force and effect as if
made on and as of each such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such specific
date); and (iii) any extension or similar fee and any other condition to which
such extension is subject shall have been paid or complied with by the Company.
(b) Written notice setting forth the Lenders which have agreed to
extend the Credit Termination Date shall be delivered by the Administrative
Agent to the Company on the Business day after the Consent Date. Each Lender
that determines not to extend the Credit Termination Date (together with any
Lender which fails to notify the Administrative Agent by the Consent Date, each
a "Non-Extending Lender") shall notify the Administrative Agent (which shall
promptly notify the Company) of such fact promptly after such determination. No
extension of the Credit Termination Date shall be effective unless each Non-
Extending Lender shall have been paid in full by the Company all amounts owing
to such Lender hereunder on or before the Credit Termination Date as then in
effect with respect to such Non-Extending Lender. The Commitment of such Non-
Extending Lender shall terminate on the Credit Termination Date as then in
effect with respect to such Non-Extending Lender.
(c) If the Required Lenders consent to the extension of the Credit
Termination Date for such Lenders, not later than the Credit Termination Date as
then in effect with respect to such Non-Extending Lender, the Company may
replace each Non-Extending Lender with another financial institution (which may
be a Lender) with the approval of the Administrative Agent, which financial
institution shall have entered into an agreement in form and substance
satisfactory to the Company and the Administrative Agent pursuant to which such
financial institution shall, effective as of such Credit Termination Date,
undertake a Commitment not to exceed the aggregate Commitments of the Non-
Extending Lenders hereunder expiring on such date. If such financial
institution is a Lender, such Commitment shall be in addition to such Lender's
Commitment hereunder on such date.
Section 3. PAYMENTS OF PRINCIPAL AND INTEREST.
3.01 REPAYMENT OF LOANS. The Company hereby promises to pay to the
Administrative Agent for account of each Lender the entire outstanding principal
amount of such Lender's Loans, and each Loan shall mature, on the Credit
Termination Date.
3.02 INTEREST. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but
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excluding the date such Loan shall be paid in full, at the following rates per
annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin (as in
effect from time to time); and
(b) during such periods as such Loan is a LIBOR Loan, the LIBO Rate
plus the Applicable Margin (as in effect from time to time).
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable Post-
Default Rate on any principal of any Loan made by such Lender and on any other
amount payable by the Company hereunder or under the Notes held by such Lender
to or for account of such Lender, which shall not be paid in full when due
(whether at stated maturity, by acceleration or otherwise), for the period from
and including the due date thereof to but excluding the date the same is paid in
full. Accrued interest on each Loan shall be payable (i) in the case of a Base
Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a LIBOR Loan,
on the last day of each Interest Period therefor and, if such Interest Period is
six months, on the date which is three months after commencement thereof and
(iii) in the case of any Loan, upon the payment or prepayment thereof or the
Conversion of such Loan to a Loan of another Type (but only on the principal
amount so paid, prepaid or Converted), except that interest payable at the Post-
Default Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for herein or any change therein,
the Administrative Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Company.
Section 4. PAYMENTS; PRO RATA TREATMENT; COMPUTATIONS; ETC.
4.01 PAYMENTS.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Company under this
Agreement and the Notes, shall be made in Dollars, in immediately available
funds, without deduction, set-off or counterclaim, to the Administrative Agent
at account number 630-00-480 (for the account of "CIBC, New York Agency" and for
further credit to "Agented Loans" at account number 07-09611, Attn:
Syndications, Reference: "CRIIMI MAE") maintained by the Administrative Agent at
Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York
10260 (ABA # 021-000-480), not later than 1:00 p.m. New York time on the date on
which such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day).
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(b) Any Lender for whose account any such payment is to be made, may
(but shall not be obligated to) debit the amount of any such payment which is
not made by such time to any ordinary deposit account of the Company with such
Lender (with notice to the Company).
(c) The Company shall, at the time of making each payment under this
Agreement or any Note, specify to the Administrative Agent (which shall so
notify the intended recipient(s) thereof) the Loans or other amounts payable by
the Company hereunder to which such payment is to be applied (and in the event
that it fails to so specify, or if an Event of Default has occurred and is
continuing, such Lender may apply the amount of such payment received by it from
the Administrative Agent in such manner as such Lender may determine to be
appropriate).
(d) Each payment received by the Administrative Agent under this
Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeeding Business Day and interest shall be payable for
any principal so extended for the period of such extension.
4.02 PRO RATA TREATMENT. Except to the extent otherwise provided
herein: (a) each borrowing under Section 2.01 shall be made from the Lenders,
each payment of fees under Section 2.04(b) shall be made for account of the
Lenders, and each termination or reduction of the amount of the Commitments
under Section 2.03(b) shall be applied to the respective relevant Commitments of
the Lenders, pro rata according to the amounts of their respective Commitments;
(b) the making, Conversion and Continuation of Loans of a particular Type (other
than Conversions provided for by Section 5.04) shall be made pro rata among the
Lenders according to the amounts of their respective relevant Commitments (in
the case of making of Loans) or Loans (in the case of Conversions and
Continuations of Loans) and the then current Interest Period for each Loan of
such Type shall be coterminous; (c) each payment or optional or mandatory
prepayment of principal of Loans by the Company (except as otherwise provided in
Section 2.09(b), 5.07(b) or the last paragraph of Section 9) shall be made for
account of the Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans held by them; and (d) each payment of interest on
Loans by the Company shall be made for account of the Lenders pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders.
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4.03 COMPUTATIONS. Interest on LIBOR Loans and Base Rate Loans with
an interest rate calculated with reference to the Federal Funds Rate shall be
computed on the basis of a year of 360 days and actual days elapsed (including
the first day but excluding the last day) occurring in the period for which
payable. The commitment fee and interest on Base Rate Loans with an interest
rate calculated with reference to the Prime Rate shall be computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable.
4.04 MINIMUM AMOUNTS. Except for prepayments made pursuant to
Section 2.08(b) or Conversions made pursuant to Section 5.04, each borrowing,
Conversion and prepayment of principal of Loans shall be in an amount at least
equal to $5,000,000 or in any integral multiple of $1,000,000 in excess thereof
(borrowings, Conversions or prepayments of or into Loans of different Types or,
in the case of LIBOR Loans, having different Interest Periods at the same time
hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Type or Interest Period). Anything in
this Agreement to the contrary notwithstanding, the aggregate principal amount
of LIBOR Loans having the same Interest Period shall be in an amount at least
equal to $5,000,000 or any integral multiple of $1,000,000 in excess thereof
and, if any LIBOR Loans would otherwise be in a lesser principal amount for any
period, such Loans shall be Base Rate Loans during such period.
4.05 CERTAIN NOTICES.
(a) Notices by the Company to the Administrative Agent of
terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans shall be irrevocable and shall
be effective only if received by the Administrative Agent not later than 10:00
a.m. New York time (i) two (2) Business Days prior to any termination or
reduction of Commitments, (ii) on the same day as any borrowing or optional
prepayment of or Conversion into a Base Rate Loan and (iii) three (3) Business
Days prior to any borrowing or optional prepayment of, Conversion into or
Continuation as a LIBOR Loan. Each such notice of borrowing shall be
substantially in the form as set forth in Exhibit B and each such notice of
Conversion or Continuation shall be substantially in the form of Exhibit C.
(b) Each such notice of termination or reduction shall specify the
amount of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Type of each Loan to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04) of each Loan to be borrowed, Converted, Continued or
prepaid (and, in the case of a Conversion, the Type
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of Loan to result from such Conversion) and the Interest Period of each Loan to
be borrowed, Converted into or Continued as a LIBOR Loan and the date of
borrowing, Conversion, Continuation or optional prepayment (which shall be a
Business Day). The Administrative Agent shall promptly notify the Lenders of
the contents of each such notice. In the event that the Company fails to select
the Type of Loan, or the duration of any Interest Period, for any LIBOR Loan
within the time period and otherwise as provided in this Section 4.05, such Loan
(if outstanding as a LIBOR Loan) will be automatically Converted into a Base
Rate Loan on the last day of the then current Interest Period for such Loan or
(if outstanding as a Base Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan.
4.06 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by it hereunder or (in the case of the Company) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the Administrative
Agent until the date the Administrative Agent recovers such amount at a rate per
annum equal to the Federal Funds Rate for such day and, if such recipient(s)
shall fail promptly to make such payment, the Administrative Agent shall be
entitled to recover such amount, on demand, from the Payor, together with
interest as aforesaid.
4.07 SHARING OF PAYMENTS, ETC.
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option, to offset balances held by
it for account of the Company at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans or
any other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such balances are then due to the Company), in which case
it shall promptly notify the Company and the Administrative Agent thereof,
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provided that such Lender's failure to give such notice shall not affect the
validity thereof.
(b) If any Lender shall obtain from the Company payment of any
principal of or interest on any Loan owing to it or payment of any other amount
under this Agreement or any Note held by it through the exercise of any right of
set-off, banker's lien or counterclaim or similar right or otherwise (other than
from the Administrative Agent as provided herein), and, as a result of such
payment, such Lender shall have received a greater percentage of the principal
of or interest on the Loans or such other amounts then due hereunder by the
Company to such Lender than the percentage received by any other Lenders of the
principal of or interest on the Loans or such other amounts then due by the
Company to such other Lenders, it shall promptly purchase from such other
Lenders participations in (or, if and to the extent specified by such Lender,
direct interests in) the Loans or such other amounts, respectively, owing to
such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses which may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans or such other amounts,
respectively, owing to each of the Lenders. To such end all the Lenders shall
make appropriate adjustments among themselves (by the resale of participation
sold or otherwise) if such payment is rescinded or must otherwise be restored.
(c) The Company agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Company. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
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Section 5. YIELD PROTECTION, ETC.
5.01 ADDITIONAL COSTS.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate it or
any Applicable Lending Office for any costs incurred by such Lender or
Applicable Lending Office, or any reduction of the rate of return on assets or
equity of such Lender or Applicable Lending Office to a level below that which
such Lender or Applicable Lending Office could have achieved, which such Lender
determines are attributable to its making or maintaining of any LIBOR Loans or
its Commitment to make any LIBOR Loans hereunder, or any reduction in any amount
receivable by such Lender hereunder in respect of any of such Loans or such
Commitment (such increases in costs and reductions in amounts receivable being
herein called "Additional Costs"), resulting from any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable to such
Lender under this Agreement or its Notes in respect of any of such Loans
(other than taxes imposed on or measured by the overall net income of such
Lender or of its Applicable Lending Office for any of such Loans by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit, capital
adequacy, capital maintenance or similar requirements (other than the
Reserve Requirement utilized in the determination of the LIBO Rate for such
Loan) relating to any extensions of credit or other assets of, or any
deposits with or other liabilities of, such Lender (including any of such
Loans or any deposits referred to in the definition of "LIBO Rate" in
Section 1.01), or any commitment of such Lender (including the Commitments
of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or such
Lender's Notes (or any of such extensions of credit or liabilities) or such
Lender's Commitments.
(b) Without limiting the effect of the provisions of paragraph (a) of
this Section 5.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on LIBOR Loans is determined as provided in this Agreement or a
category of extensions of credit or commitments or other assets of such Lender
which includes LIBOR Loans or such Lender's Commitments or (ii) becomes subject
to restrictions on the amount of such a category of liabilities or assets which
it
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may hold, then, if such Lender so elects by notice to the Company (with a copy
to the Administrative Agent), the obligation of such Lender to make or Continue,
or to Convert Loans of any other Type into, Loans of such Type hereunder shall
be suspended until such Regulatory Change ceases to be in effect (in which case
the provisions of Section 5.04 shall be applicable).
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, any Applicable
Lending Office or the bank holding company of which such Lender is a subsidiary)
for any costs which it determines are attributable to the maintenance by such
Lender (or such Applicable Lending Office or such bank holding company),
pursuant to any law or regulation or any interpretation, directive or request
(whether or not having the force of law) of any court or governmental or
monetary authority (i) following any Regulatory Change or (ii) implementing any
risk-based capital guideline or requirement (whether or not having the force of
law and whether or not the failure to comply therewith would be unlawful)
heretofore or hereafter issued by any government or governmental or supervisory
authority implementing at the national level the Basle Accord (including,
without limitation, the Final Risk-Based Capital Guidelines of the Board of
Governors of the Federal Reserve System (12 CFR Part 208, Appendix A; 12 CFR
Part 225, Appendix A) and the Final Risk-Based Capital Guidelines of the Office
of the Comptroller of the Currency (12 CFR Part 3, Appendix A)), of capital in
respect of its Commitments or Loans (such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Lender (or any Applicable Lending Office or such bank holding
company) to a level below that which such Lender (or any Applicable Lending
Office or such bank holding company) could have achieved but for such law,
regulation, interpretation, directive or request). For purposes of this Section
5.01(c), "Basle Accord" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Lending Regulations and
Supervisory Practices in its paper entitled "International Convergence of
Capital Measurement and Capital Standards" dated July 1988, as amended, modified
and supplemented and in effect from time to time or any replacement thereof.
(d) Each Lender shall notify the Company of any event occurring after
the date of this Agreement that will entitle such Lender to compensation under
paragraph (a) or (c) of this Section 5.01 as promptly as practicable after such
Lender obtains actual knowledge thereof. Each Lender will furnish to the
Company a certificate setting forth the basis and amount of each request by such
Lender for compensation under paragraph (a) or (c) of this Section 5.01.
Determinations and allocations by any Lender for purposes of this Section 5.01
of the effect of any Regulatory
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Change pursuant to paragraph (a) or (b) of this Section 5.01, or of the effect
of capital maintained pursuant to paragraph (c) of this Section 5.01, on its
costs or rate of return of maintaining Loans or its obligation to make Loans, or
on amounts receivable by it in respect of Loans, and of the amounts required to
compensate such Lender under this Section 5.01, shall be conclusive, absent
manifest error.
5.02 LIMITATION ON TYPES OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any LIBO Rate for any
Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "LIBO Rate" in Section 1.01 are not being
provided in the relevant amounts or for the relevant maturities for
purposes of determining rates of interest for LIBOR Loans as provided
herein; or
(b) the Required Lenders determine, which determination shall be
conclusive, and notify the Administrative Agent that the relevant rates of
interest referred to in the definition of "LIBO Rate" in Section 1.01 upon
the basis of which the rate of interest for LIBOR Loans for such Interest
Period is to be determined are not likely adequately to cover the cost to
such Lenders of making or maintaining such Type of Loans for such Interest
Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof, and so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Loans of such Type, to Continue
Loans of such Type or to Convert Loans of any other Type into Loans of such Type
and the Company shall, on the last day(s) of the then current Interest Period(s)
for the outstanding Loans of such Type, either prepay such Loans or Convert such
Loans into another Type of Loan in accordance with Section 2.08.
5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain LIBOR
Loans hereunder, then such Lender shall promptly notify the Company thereof
(with a copy to the Administrative Agent) and such Lender's obligation to make
or Continue, or to Convert Loans of any other Type into, LIBOR Loans shall be
suspended until such time as such Lender may again make and maintain LIBOR Loans
(in which case the provisions of Section 5.04 shall be applicable).
5.04 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to
make LIBOR Loans or Continue, or to Convert Loans of any other Type into, Loans
of a particular Type shall be
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suspended pursuant to Section 5.01(b) or 5.03 (Loans of such Type being herein
called "Affected Loans" and such Type being herein called the "Affected Type"),
such Lender's Affected Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Affected
Loans (or on such earlier date as such Lender may specify to the Company with a
copy to the Administrative Agent) and, unless and until such Lender gives notice
as provided below that the circumstances specified in Section 5.01(b) or 5.03
which gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been so
Converted, all payments and prepayments of principal which would otherwise
be applied to such Lender's Affected Loans shall be applied instead to its
Base Rate Loans; and
(b) all Loans which would otherwise be made or Continued by such
Lender as Loans of the Affected Type shall be made or Continued instead as
Base Rate Loans and all Loans of such Lender which would otherwise be
Converted into Loans of the Affected Type shall be Converted instead into
(or shall remain as) Base Rate Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01(b) or 5.03 which gave
rise to the Conversion of such Lender's Affected Loans pursuant to this Section
5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type are
outstanding, such Lender's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Loans of the Affected Type, to the extent necessary so that, after giving effect
thereto, all Loans held by the Lenders holding Loans of the Affected Type and by
such Lender are held pro rata (as to principal amounts, Types and Interest
Periods) in accordance with their respective Commitments.
5.05 COMPENSATION. The Company shall pay to the Administrative Agent
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense which such Lender determines is attributable to:
(a) any payment, prepayment or Conversion of a LIBOR Loan made by
such Lender for any reason (including, without limitation, the prepayment
of any Loans pursuant to Section 2.08(b) or 5.07 and the acceleration of
the Loans pursuant to Section 9) on a date other than the last day of the
Interest Period for such Loan; or
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(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 to be satisfied) to borrow a LIBOR Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest which otherwise would have accrued
on such principal amount at a rate per annum equal to the interest component of
the amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
5.06 TAXES.
(a) Any and all payments by the Company hereunder or under the Notes
shall be made, in accordance with Section 4, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings imposed by the United States of America (or any
political subdivision or tax authority of or in such jurisdiction) and all
liabilities with respect thereto, EXCLUDING, in the case of each Lender and the
Administrative Agent, taxes imposed on its income, and franchise taxes imposed
on it, by the jurisdiction under the laws of which such Lender or the
Administrative Agent (as the case may be) is organized or any political
subdivision thereof and, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction of such Lender's
Applicable Lending Office or any political subdivision thereof (all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Company shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or the Administrative Agent, (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 5.06) such Lender or the Administrative Agent (as the case
may be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions and
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(iii) the Company shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with Applicable Laws.
(b) In addition, the Company agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made hereunder or under the Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").
(c) The Company will indemnify each Lender and the Administrative
Agent for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 5.06) paid by such Lender or the Administrative Agent
(as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall
be made within 30 days from the date such Lender or the Administrative Agent (as
the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the
Company will furnish to the Administrative Agent, at its address referred to in
Section 11.02, the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other agreement of the
Company hereunder, the agreements and obligations of the Company contained in
this Section 5.06 shall survive the payment in full of principal and interest
hereunder and under the Notes.
(f) Each Non-U.S. Lender agrees that it shall deliver to the Company
and the Administrative Agent (A) two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the
case may be, certifying that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes and (B) an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption from United
States backup withholding tax. Each Non-U.S. Lender which delivers a Form 1001
or 4224 and Form W-8 and W-9 pursuant to the next preceding sentence further
undertakes to deliver to the Company and the Administrative Agent, two further
copies of Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms,
or other manner of certification, as the case may be, on or before the date that
any form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it, and such
extensions or renewals thereof as may
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reasonably be requested by the Company, certifying in the case of a Form 1001 or
4224 that such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes,
unless in any such cases an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent a Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Company that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or W-9, establishing an
exemption from United States backup withholding tax.
5.07 ADDITIONAL ACTION IN CERTAIN EVENTS.
(a) If an event or condition described in Sections 5.01(a) or (c),
5.03 or 5.06(a) has occurred or exists, or, in the case of subsection (i) below,
will occur or exist, but without prejudice to the obligations of the Company
under Sections 5.01 or 5.06, the Lender or Lenders so affected by such event or
condition will, if so requested by the Company, (i) consult with the Company and
the Administrative Agent for up to 30 days from the date of such request with a
view to agreeing to a mutually acceptable alternative arrangement which will
avoid or minimize the payment of such additional amount or avoid such illegality
in the future and which is not prejudicial to that Lender or (ii) make a good
faith effort (which shall not require the Lender to incur any loss) to make
within 30 days, subject to the consent of the Company, an assignment, in
accordance with Section 11.06, of all its rights and delegation of its
obligations under this Agreement, including the Commitments and the Outstanding
Loans to one of its subsidiaries or affiliates or to another Lender or to a
financial institution pursuant to such Section, for the purpose of causing such
event or condition to cease to exist or to reduce the liability of the Company,
so long as such assignment and delegation will not create another such event or
condition specified above under Sections 5.01(a) or (c), 5.03 or 5.06(a), or
cause a condition or event in the subsections specified above which results in
no reduction in the liability of the Company under such Sections.
(b) Subject to (a) above, the Company shall have the right to prepay,
if an event or condition described in Sections 5.01(a) or (c), 5.03 or 5.06(a)
has occurred or exists, the Outstanding Loans, if any, and terminate the
Commitments, of the Lender or Lenders so affected by such event or condition,
upon giving the Administrative Agent and such Lender or Lenders at least five
Business Days' prior irrevocable notice thereof specifying the date of
prepayment, if any, and termination. Any such prepayment hereunder shall be
made by the Company, together with interest thereon and any other amounts
payable hereunder
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(including any amounts payable under Section 5.05 as a result of such
prepayment), on the date specified in such notice.
Section 6. CONDITIONS PRECEDENT.
6.01 INITIAL LOAN. The obligation of any Lender to make its initial
Loan hereunder is subject to the receipt by the Administrative Agent with a copy
for each Lender of the following items, each of which shall be satisfactory to
the Administrative Agent in form and substance:
(a) This Agreement executed by the Company, the Administrative Agent
and the Lenders.
(b) The following documents, each certified as indicated below:
(i) a copy of the charter, as amended, of the Company certified
by the Secretary of State of Maryland, and a certificate as to the
good standing of and charter documents filed by the Company from such
Secretary of State, dated as of a recent date;
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company substantially in the form attached as Exhibit D certifying
(A) that attached thereto is a true and complete copy of the by-laws
of the Company as in effect on the date of such certificate, (B) that
attached thereto is a true and complete copy of resolutions duly
adopted by the board of directors of the Company authorizing the
execution, delivery and performance of the Basic Documents and the
extensions of credit hereunder, and that such resolutions have not
been modified, rescinded or amended and are in full force and effect,
(C) that the charter of the Company has not been amended since the
date of the certification thereto furnished pursuant to clause (i)
above, and (D) as to the incumbency and specimen signature of each
officer of the Company executing the Basic Documents and each other
document to be delivered by the Company from time to time in
connection therewith (and the Administrative Agent and each Lender may
conclusively rely on such certificate until it receives notice in
writing from such Person); and
(iii) a certificate of another officer of the Company as to the
incumbency and specimen signature of the Secretary or Assistant
Secretary, as the case may be, of the Company.
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(c) A certificate of a senior officer of the Company to the effect
set forth in the first sentence of Section 6.02.
(d) An opinion of Arent Fox Kintner Plotkin & Kahn, counsel to the
Company, substantially in the form of Exhibit E.
(e) The Notes, duly completed and executed.
(f) Evidence of the termination of the Letter of Credit and
Reimbursement Agreement, the payment of all amounts owed thereunder and the
release of all collateral securing the obligations of CRI Funding
Corporation thereunder.
(g) Evidence of the payment by the Company of (i) fees payable under
Section 2.04 and (ii) amounts owing under Section 11.03 to the extent it
has received invoices therefor on or before the date of the initial
borrowing hereunder.
(h) Evidence of such filings of financing statements and assignments
or notices of assignments of the Eligible Participations and such other
action in such jurisdictions as the Administrative Agent may deem necessary
or appropriate in order to create a first priority perfected security
interest in favor of the Collateral Agent in the Eligible Participations,
the Mortgage-Backed Securities and the other Assigned Collateral.
(i) An executed Security Agreement, in form and substance
satisfactory to the Lenders.
(j) A Collateral Valuation Certificate and an Unencumbered Asset
Valuation Certificate showing the Loan Value or Value, as applicable, of
the Assigned Collateral or the Unencumbered Assets, as applicable, as of a
date not more than five Business Days prior to the date of the initial Loan
hereunder.
(k) Evidence of the transfer and delivery of Mortgage-Backed
Securities and Certificates of Participation listed on such Collateral
Valuation Certificate to the Collateral Agent pursuant to Article VII of
the Security Agreement.
(l) A copy of any required consent referred to in Section 7.04.
(m) Such other documents as the Administrative Agent or any Lender or
special New York counsel to the Lenders may reasonably request.
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6.02 INITIAL AND SUBSEQUENT EXTENSIONS OF CREDIT. The obligation of
the Lenders to make any Loan to the Company upon the occasion of each borrowing
hereunder (including the initial borrowing) is subject to the further conditions
precedent that, both immediately prior to the making of such Loan and also after
giving effect thereto: (i) no Default shall have occurred and be continuing;
(ii) the representations and warranties made by the Company in Section 7 and in
Section 3.1 of the Security Agreement shall be true and complete on and as of
the date of the making of such Loan with the same force and effect as if made on
and as of such date; and (iii) there shall not have occurred any change, or
development or event involving a prospective change, which in the opinion of the
Required Lenders could have a Material Adverse Effect. Each notice of borrowing
by the Company hereunder shall constitute a certification by the Company to the
effect set forth in the preceding sentence (both as of the date of such notice
and, unless the Company otherwise notifies the Administrative Agent prior to the
date of such borrowing, as of the date of such borrowing).
Section 7. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Administrative Agent and the Lenders that:
7.01 CORPORATE EXISTENCE.
(a) Each of the Company and its Subsidiaries: (i) is a corporation,
partnership or other entity duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization; (ii) has all
requisite corporate or other power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (iii) is qualified
to do business and in good standing in all jurisdictions in which the nature of
the business conducted by it makes such qualification necessary and where
failure so to qualify would have a Material Adverse Effect.
(b) The Company is qualified as a REIT under Sections 856 to 860,
inclusive, of the Code.
7.02 FINANCIAL CONDITION. The consolidated balance sheets of the
Company and its Consolidated Subsidiaries as of December 31, 1992 and the
related consolidated statements of income, retained earnings and changes in
financial position (or of cash flow, as the case may be) of the Company and its
Consolidated Subsidiaries for the fiscal year ended on said date, with the
opinion thereon (in the case of said consolidated balance sheet and statements)
of Arthur Andersen & Co., and the unaudited consolidated balance sheets of the
Company and its Consolidated Subsidiaries as of September 30, 1993 and the
related consolidated statements of income, retained earnings and changes in
financial position (or of cash flow, as the case may
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be) of the Company and its Consolidated Subsidiaries for the three-month period
ended on such date, heretofore furnished and delivered to each of the Lenders,
are complete and correct and fairly present the consolidated financial condition
of the Company and its Consolidated Subsidiaries as at said dates and the
consolidated results of their operations for the fiscal year and three-month
period ended on said dates (subject, in the case of such financial statements as
of December 31, 1992, to normal year-end audit adjustments), all in accordance
with GAAP. Neither the Company nor any of its Subsidiaries had on said dates
any material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheets as at said dates. Since December 31, 1992, there has been no material
adverse change in the consolidated financial condition, operations, business or
prospects of the Company individually or the Company and its Consolidated
Subsidiaries taken as a whole from that set forth in said financial statements
as at said date.
7.03 LITIGATION. There are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Company) threatened against the Company or
any of its Subsidiaries in which there is a reasonable possibility of an adverse
determination that could have a Material Adverse Effect.
7.04 NO BREACH. None of the execution and delivery of this
Agreement, the Notes or any other Basic Document, the consummation of the
transactions herein and therein contemplated and compliance with the terms and
provisions hereof and thereof will conflict with or result in a breach of, or
require any consent (except consents under the Nomura Facilities, which consents
have been obtained) under, the charter or by-laws of the Company, or any
Applicable Law, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Company or any of its Subsidiaries is a party or by which any of them is bound
or to which any of them is subject, or constitute a default under any such
agreement or instrument.
7.05 ACTION. The Company has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
the Notes and the other Basic Documents; the execution, delivery and performance
by the Company of this Agreement, the Notes and the other Basic Documents have
been duly authorized by all necessary corporate action on its part; and this
Agreement and each other Basic Document has been duly and validly executed and
delivered by the Company and constitutes, and each of the Notes when executed
and delivered for value will constitute, its legal, valid and binding
obligation, enforceable in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency,
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reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
7.06 APPROVALS. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the Company
of this Agreement, the Notes or the other Basic Documents or for the validity or
enforceability thereof.
7.07 USE OF LOANS. Neither the Company nor any of its Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock and no part of the proceeds of any extension
of credit hereunder will be used to buy or carry any Margin Stock.
7.08 ERISA. As of the date on which the initial Loan is made
hereunder and except as disclosed to the Lenders through the Agent in writing
prior to the date on which the initial Loan is made hereunder, the Company and
the ERISA Affiliates have fulfilled their respective obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or any Plan or Multiemployer Plan (other than to make contributions in the
ordinary course of business).
7.09 TAX RETURNS. Each of the Company and its Subsidiaries has filed
all tax returns required to be filed by it and has paid all taxes and
assessments payable by it as shown on such returns to have become due other than
taxes, the payment of which is being contested pursuant to Section 8.07.
7.10 INVESTMENT COMPANY ACT. The Company is not an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
7.11 PUBLIC UTILITY HOLDING COMPANY ACT. The Company is not a
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
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7.12 INDEBTEDNESS. There exists no credit agreement, loan agreement,
indenture, purchase agreement, guarantee or other arrangement providing for or
otherwise relating to any Indebtedness or any extension of credit (or commitment
for any extension of credit) to, or guarantee by, the Company or any of its
Subsidiaries the aggregate principal or face amount of which equals or exceeds
(or may equal or exceed) $1,000,000, other than Indebtedness pursuant to this
Agreement, the Existing Interest Rate Hedge Agreements, the Signet Credit
Agreement, the Nomura Facilities and certain intercompany debt of a Subsidiary
to the Company that will be eliminated upon consolidation.
7.13 ENVIRONMENTAL MATTERS. The Company and each of its Subsidiaries
have obtained all permits, licenses and other authorizations which are required
under all Environmental Laws, except to the extent failure to have any such
permit, license or authorization would not have a Material Adverse Effect. The
Company and each of its Subsidiaries are in compliance with the terms and
conditions of all such permits, licenses and authorizations, and are also in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a Material Adverse Effect.
7.14 SUBSIDIARIES, ETC. Set forth in Schedule III is a complete and
correct list, as of the date of this Agreement, of all Subsidiaries of the
Company (and the respective jurisdiction of incorporation of each such
Subsidiary, if incorporated) and of all investments held by the Company or any
of its Subsidiaries in any joint venture. Except as disclosed in Schedule III
the Company owns, free and clear of Liens, all outstanding shares of such
Subsidiaries (and each such Subsidiary owns, free and clear of Liens, all
outstanding shares of its Subsidiaries) and all such shares are validly issued,
fully paid and non-assessable and the Company (or the respective Subsidiary)
also owns, free and clear of Liens, all such investments.
7.15 ACCURACY OF INFORMATION. All information, financial or
otherwise, written or verbal, supplied by the Company to the Administrative
Agent or any Lender is true, complete and accurate in all material respects.
7.16 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company contained in each Basic Document delivered in
connection with this Agreement are, or when each such document is delivered will
be, true and correct in all material respects.
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7.17 FULL DISCLOSURE. No certificate, opinion, or any other
statement made or furnished in writing to the Lender by or on behalf of the
Company in connection with any of the Basic Documents or the transactions
contemplated herein, contains any untrue statement of a material fact, or omits
to state a material fact necessary in order to make any statement contained
therein or herein not misleading, as of the date such statement was made. There
is no fact concerning the Company, any of its Subsidiaries, or the Assigned
Collateral known to the Company which has, or will in the reasonable judgment of
the Company have, a Material Adverse Effect, which fact has not been set forth
herein, in the financial statements delivered pursuant to Section 8.01, or in a
certificate, opinion, or other written statement so made or furnished to the
Lender prior to the date as of which this representation is deemed made.
7.18 PARI PASSU. The obligations of the Company to each Lender
hereunder rank and will at all times rank at least PARI PASSU in right of
payment with all other unsecured and unsubordinated debt of the Company.
7.19 TITLE TO ASSETS. The Company has legal title to or a legal and
valid leasehold interest in all Property and assets owned by it on the date
hereof, and will have legal title to all Property and assets acquired by it at
any time subsequent to the date hereof, free and clear of all Liens, except to
the extent that the failure to have such title or interest would not have a
Material Adverse Effect.
7.20 REIT ADVISOR. Neither the Company nor CRI Insured Mortgage
Associates Advisor Limited Partnership has given notice of its intention to
terminate or not renew the advisory agreement between such parties and such
agreement remains in full force and effect.
7.21 COMPLIANCE WITH APPLICABLE LAWS, ETC. The Company and each of
its Subsidiaries is in compliance with all Applicable Laws in respect of the
conduct of its business and the ownership of its property, except such
noncompliances as would not, in the aggregate, have a Material Adverse Effect.
Section 8. COVENANTS OF THE COMPANY. The Company covenants and
agrees with the Lenders and the Administrative Agent that, so long as any
Commitment or Loan is outstanding and until payment in full of all amounts
payable by the Company hereunder:
8.01 FINANCIAL STATEMENTS; OTHER INFORMATION. The Company shall
deliver to the Administrative Agent (with a copy for each of the Lenders):
(a) as soon as available and in any event within 105 days after the
end of each fiscal year of the Company,
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consolidated statements of income, retained earnings and cash flow of the
Company and its Consolidated Subsidiaries for such year and the related
consolidated balance sheets as at the end of such year, setting forth in
each case in comparative form the corresponding consolidated figures for
the preceding fiscal year, and accompanied by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said consolidated financial statements
fairly present the consolidated financial condition and results of
operations of the Company and its Consolidated Subsidiaries as at the end
of, and for, such fiscal year in accordance with GAAP;
(b) as soon as available and in any event within 60 days after the
end of the first three quarterly fiscal periods of each fiscal year of the
Company, consolidated statements of income, retained earnings and cash
flow of the Company and its Consolidated Subsidiaries for such period and
for the period from the beginning of the respective fiscal year to the end
of such period, and the related consolidated balance sheets as at the end
of such period, setting forth in each case in comparative form the
corresponding consolidated figures for the corresponding period in the
preceding fiscal year, accompanied by a certificate of a senior financial
officer of the Company, which certificate shall state that said financial
statements fairly present the consolidated financial condition and results
of operations of the Company and its Consolidated Subsidiaries, in
accordance with GAAP as at the end of, and for, such period (subject to
normal year-end audit adjustments);
(c) promptly after their becoming available:
(i) copies of all financial statements, reports and proxy
statements that the Company shall have sent to its stockholders
generally;
(ii) copies of all registration statements that the Company shall
file, other than employee benefit plans, and copies of all regular and
periodic reports, if any, that the Company shall file with the
Securities and Exchange Commission, or any governmental agency or
agencies substituted therefor, or with any national securities
exchange, or shall furnish to its shareholders;
(d) if requested by the Administrative Agent, within five (5)
Business Days after the same are received by the Company, copies of any
notices filed with HUD with respect to defaults by obligors under Mortgage
Investments;
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(e) on the first Tuesday of each month (or, if such Tuesday is not a
Business Day, on the next succeeding Business Day), an Unencumbered Asset
Valuation Certificate showing the Value of the Unencumbered Assets as of
the last Tuesday of the immediately preceding month (or, if such Tuesday is
not a Business Day as of the next succeeding Business Day);
(f) within 48 hours after becoming aware that the Value of
Unencumbered Assets is less than an amount equal to 5% of the Loans
Outstanding at such time, telephone advice thereof confirmed in writing as
soon as possible thereafter (such telephone advice and confirmation to be
provided to the Administrative Agent at the same times they are
respectively provided to the Lender);
(g) on the dates specified in the Security Agreement, a Collateral
Valuation Certificate, which shall designate any Eligible Participations
listed therein for which an event of default of which the Company has or
should have knowledge of has occurred, or with the giving of notice or the
passage of time, an event of default will have occurred;
(h) as soon as possible, and in any event within ten days after the
Company knows or has reason to know that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a treasurer or chief financial
officer of the Company setting forth details respecting such event or
condition and the action, if any, which the Company or its ERISA Affiliate
proposes to take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by the Company or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in section 4043(b) of
ERISA, with respect to a Plan, as to which PBGC has not by regulation
waived the requirement of section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event;
(ii) the filing under section 4041 of ERISA of a notice of intent
to terminate any Plan or the termination of any Plan;
(iii) the institution by PBGC of proceedings under section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by the Company or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by PBGC with respect to such Multiemployer Plan;
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(iv) the complete or partial withdrawal by the Company or any
ERISA Affiliate under section 4201 or 4204 of ERISA from a
Multiemployer Plan, or the receipt by the Company or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under section 4041A
of ERISA; and
(v) the institution of a proceeding by a "fiduciary" (within the
meaning of Section 3(21) of ERISA) of any Multiemployer Plan against
the Company or any ERISA Affiliate to enforce section 515 of ERISA,
which proceeding is not dismissed within 30 days;
(i) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
The Company will furnish to the Administrative Agent (with a copy for each
Lender), at the time it furnishes each set of financial statements pursuant to
paragraph (a) or (b) above, a certificate of a senior financial officer of the
Company (i) to the effect that no Default has occurred and is continuing (or, if
any Default has occurred and is continuing, describing the same in reasonable
detail and describing the action that the Company has taken and proposes to take
with respect thereto) and (ii) setting forth in reasonable detail the
computations necessary to determine whether the Company is in compliance with
each of Sections 8.10, 8.11, 8.12 and, as applicable, 8.13 as of the end of the
respective quarterly fiscal period or fiscal year.
8.02 LITIGATION. The Company will promptly give to the
Administrative Agent (with a copy for each Lender) notice of all legal or
arbitral proceedings, and of all proceedings by or before any governmental or
regulatory authority or agency, and any material development in respect of such
legal or other proceedings, affecting the Company or any of its Subsidiaries,
except proceedings in which there is no reasonable possibility of an adverse
determination that could have a Material Adverse Effect.
8.03 EXISTENCE, ETC.
(a) The Company will, and will cause each of its Subsidiaries to:
preserve and maintain its legal existence and all of its material rights,
privileges, licenses and franchises (provided that nothing in this Section 8.03
shall prohibit any transaction expressly permitted under Section 8.05); comply
with the requirements of all Applicable Laws (including without limitation, all
Environmental Laws), if failure to comply with
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such requirements would have a Material Adverse Effect; pay and discharge all
taxes, assessments and governmental charges or levies imposed on it or on its
income or profits or on any of its Property prior to the date on which penalties
attach thereto, except for any such tax, assessment, charge or levy the payment
of which is being contested in good faith and by proper proceedings and against
which adequate reserves are being maintained; maintain all of its Properties
used or useful in its business in good working order and condition, ordinary
wear and tear excepted; and permit representatives of any Lender or the
Administrative Agent, during normal business hours, to examine, copy and make
extracts from its books and records, to inspect its Properties, and to discuss
its business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may be).
(b) The Company shall maintain its status as a REIT or maintain its
status as a pass-through entity which is not subject to taxation at the entity
level.
8.04 INSURANCE. The Company shall, and shall cause each of its
Subsidiaries to, maintain worker's compensation insurance, liability insurance
and insurance on its properties, assets and business, now owned or hereafter
acquired, against such casualties, risks and contingencies, and in such types
and amounts, as are consistent with customary practices and standards of
companies engaged in similar businesses.
8.05 PROHIBITION OF FUNDAMENTAL CHANGES. The Company will not, nor
will it permit any of its Subsidiaries to, enter into any transaction of merger
or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution). The Company will not, and will not
permit any of its Subsidiaries to, convey, sell, lease transfer or otherwise
dispose of, in one transaction or a series of transactions, all or a substantial
part of its business or assets, whether now owned or hereafter acquired
(including, without limitation, shares of stock and indebtedness of
Subsidiaries, receivables and leasehold interests) if such conveyance, sale,
lease, transfer or other disposition would have a Material Adverse Effect (and
any conveyance, sale, lease, transfer or other disposition permitted by this
sentence shall be for cash consideration at fair market value). Notwithstanding
the foregoing provisions of this Section 8.05, if no Default exists or would
result therefrom:
(i) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) any other such Subsidiary; provided that if
any such transaction shall be between a Subsidiary and a Wholly-Owned
Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or
surviving corporation;
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(ii) any such Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Company or a Wholly-Owned Subsidiary of the Company;
(iii) the Company or any Subsidiary, may transfer assets to or merge or
consolidate with any other Person if the Company or such Subsidiary is the
surviving corporation; and
(iv) any Subsidiary of the Company may change its domicile from one
state in the United States of America to another state in the United States
of America.
8.06 CERTAIN NOTICES. The Company will promptly give the following
notices to the Administrative Agent (with a copy for each of the Lenders):
(a) after the Company knows or has reason to believe that any Default
has occurred, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action that the Company has taken and proposes to take
with respect thereto; and
(b) a notice with respect to any (i) event of default which the
Company has or should have knowledge under any Eligible Participation or
(ii) litigation, investigation or proceeding which may exist at any time
between the obligor of any Eligible Mortgage Investment and any Person,
which in either case, if not cured or if adversely determined, as the case
may be, would have a material adverse effect on the insurance or guarantee
on such Eligible Mortgage Investment.
8.07 LIMITATION ON LIENS. The Company will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any of its assets (including, without limitation, the
Assigned Collateral), whether now owned or hereafter acquired, or assign or
otherwise convey any right to receive income (including, without limitation,
from the Assigned Collateral), except (i) as provided in the Security Agreement;
(ii) Liens securing any Interest Rate Hedge Agreements permitted hereunder;
PROVIDED, that the aggregate market value of the collateral subject to such
Liens does not exceed $12,000,000 at any time; (iii) Liens imposed by any
governmental authority for taxes, assessments or charges not yet due or which
are being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Company or any
of its Subsidiaries, as the case may be, in accordance with GAAP; (iv) Liens
securing the Nomura Facilities, as in effect on the date hereof; and (v) Liens
pursuant to the Amended and Restated Collateral Pledge Agreement dated
December 29, 1992 securing the Signet Credit Agreement as in effect on the date
hereof,
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including Liens securing additional loans to be made under such agreement, as
amended; PROVIDED, that the aggregate amount of all loans secured under such
agreement does not exceed $85,000,000.
8.08 LIMITATION ON INDEBTEDNESS. The Company will not, nor will it
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, whether current or funded, or any other liability, except (i)
Indebtedness on account of the Loans; (ii) other Indebtedness to the
Administrative Agent or the Lenders arising hereunder; (iii) Indebtedness under
any Interest Rate Hedge Agreement entered into pursuant to Section 8.13 or under
any other Interest Rate Hedge Agreement with one or more other parties which is
a rate cap or similar agreement; (iv) existing Indebtedness on the date hereof
described in Section 7.12; (v) Indebtedness pursuant to the Signet Credit
Agreement, as amended, up to a maximum aggregate amount of Indebtedness under
such agreement of $85,000,000; and (vi) any other Indebtedness expressly
approved by the Required Lenders.
8.09 BORROWING BASE. The Company will not permit (i) the aggregate
principal amount of Outstanding Loans by any Lender to exceed such Lender's
Available Commitment or (ii) the aggregate Loan Value of U.S. Mortgage-Backed
Securities included in the Assigned Collateral to represent less than 40% of the
aggregate Loan Value of all Qualified Investments included in the Assigned
Collateral.
8.10 MINIMUM CONSOLIDATED SHAREHOLDERS' EQUITY. The Company will not
permit at any time Consolidated Shareholders' Equity to be less than (i)
$125,000,000 or (ii) at any time after the Company's proposed equity offering,
should it occur, the lesser of (a) $150,000,000 and (b) $125,000,000 plus the
aggregate proceeds (less fees and expenses) of such equity offering.
8.11 MAXIMUM TOTAL LIABILITIES. The Company will not permit at any
time the ratio of Total Liabilities to Consolidated Shareholders' Equity to
exceed 2.5 to 1.0.
8.12 FIXED CHARGE COVERAGE. The Company will not, as at the end of
any fiscal quarter, permit the Fixed Charge Coverage Ratio to be less than 1.5
to 1.0.
8.13 INTEREST RATE HEDGE PARAMETERS. If the Fixed Charge Coverage
Ratio at the end of any fiscal quarter is less than 1.75 to 1.0, the Company
shall, upon the request of the Administrative Agent, enter into additional
Interest Rate Hedge Agreements with one or more financial institutions such that
the notional aggregate principal amount is at least equal to 75% of Total
Liabilities, at fixed or maximum interest rates and upon terms and conditions
(including, without limitation, measures of
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damages for early termination and security provided) reasonably acceptable to
the Administrative Agent.
8.14 INVESTMENT POLICY. The Company shall invest its assets in
accordance with its investment policies and objectives and will use its best
efforts to comply with the requirements applicable to real estate investment
trusts or pass-through entities which are not subject to taxation at the entity
level under the Code.
8.15 ENVIRONMENTAL MATTERS. The Company will, and will cause each of
its Subsidiaries to (i) comply with all Environmental Laws and obtain and comply
in all material respects with and maintain any and all licenses, approvals,
registrations or permits required by Environmental Laws, except to the extent
that failure to do so would not be reasonably likely to have a Material Adverse
Effect; and (ii) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all governmental authorities respecting Environmental
Laws, except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings would not be
reasonably likely to have a Material Adverse Effect.
8.16 INDEMNIFICATION. The Company will pay, protect, defend,
indemnify and save harmless the Administrative Agent and each Lender, in their
capacity as such, and each of its officers, directors, shareholders, controlling
persons, employees, counsel and agents from and against all liabilities, losses,
claims, obligations, damages, penalties, causes of action, suits, disbursements,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) or judgments of any kind or nature arising from the transactions
contemplated by the Basic Documents (and including those arising out of, or in
anyway relating to, the violation or noncompliance with any Environmental Laws);
PROVIDED that the Company will not be liable to the Administrative Agent or a
Lender, in their capacity as such, each of its officers, directors,
shareholders, controlling persons, employees, counsel and agents for such
liabilities, losses, claims, damages, penalties, causes of action, suits, costs
and expenses (including, without limitation, attorneys' fees) or judgments
arising from its gross negligence or wilful misconduct or the gross negligence
or wilful misconduct of any of its officers, directors, shareholders,
controlling persons, employees or agents. If any action, suit or proceeding
arising from any of the foregoing is brought against the Administrative Agent, a
Lender, or any other person indemnified pursuant to this Section 8.16, the
Company will, if within a reasonable time requested in writing to do so and may,
at its option and at its expense, resist and defend such action, suit or
proceeding and employ counsel therefor (which counsel shall be satisfactory to
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the party requesting indemnification hereunder). The Company shall not agree to
the settlement of any such action, suit or proceeding without the consent of the
party requesting indemnification hereunder, which consent shall not be
unreasonably withheld or delayed. Each Lender or any other person indemnified
pursuant to this Section 8.16 shall have the right to employ separate counsel in
any such action, suit or proceeding and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
indemnified party unless (a) the Company has agreed to pay such fees and
expenses, or (b) the Company shall have failed to assume the defense of such
action, suit or proceeding and employ counsel reasonably satisfactory to such
indemnified party, in any such action, suit or proceeding or (c) the named
parties to any such action, suit or proceeding (including any impleaded parties)
include the Company and any indemnified party related to the Administrative
Agent or a Lender and any such indemnified party shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Company or the unrelated
indemnified party (in which case, if such indemnified party notifies the Company
in writing that it elects to employ separate counsel at the expense of the
Company, the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such indemnified party).
8.17 LINES OF BUSINESS. The Company will continue, and cause each of
its Subsidiaries to continue, to engage in a business of the same general type
as conducted by it on the date of this Agreement; PROVIDED, that the Company may
establish a Subsidiary, or fund or guaranty affiliates or special purpose
corporations, to engage in other related lines of business if such engagement
would not have a Material Adverse Effect and provided that the Company does not
make contributions (whether by means of equity investments, transfer of assets
or otherwise) of more than 5 percent of total assets of the Company (which
assets should be classified as such on a balance sheet of the Company prepared
in accordance with GAAP) to such entities.
8.18 TRANSACTIONS WITH AFFILIATES. Except as expressly permitted by
this Agreement, the Company will not, nor will it permit any of its Subsidiaries
to, directly or indirectly: (a) transfer, sell, lease, assign or otherwise
dispose of any Property to an Affiliate; (b) merge into or consolidate with or
purchase or acquire Property from an Affiliate; or (c) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, guarantees and assumptions of obligations of an
Affiliate); provided that (x) any Affiliate who is an individual may serve as a
director, officer or employee of the Company or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and
(y) the Company and its Subsidiaries may enter into transactions (other
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than extensions of credit by the Company or any of its Subsidiaries to an
Affiliate) providing for the leasing of Property, the rendering or receipt of
services or the purchase or sale of inventory and other Property in the ordinary
course of business if the monetary or business consideration arising therefrom
would be substantially as advantageous to the Company and its Subsidiaries as
the monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
8.19 USE OF PROCEEDS; UNENCUMBERED ASSETS. The Company will use the
proceeds (i) to replace the Letter of Credit facilities previously provided to
CRI Funding Corporation under the Letter of Credit and Reimbursement Agreement,
(ii) to finance the purchase and maintenance of Eligible Participations and
Mortgage-Backed Securities, (iii) to fund the Interest Rate Hedge Agreements
permitted hereunder and (iv) to pay the expenses incurred by the Company in
connection with the execution and delivery of this Agreement. Notwithstanding
the foregoing, the Company shall not permit at any time the Value of
Unencumbered Assets to be less than an amount equal to 5% of the Loans
Outstanding at such time.
8.20 MORTGAGE INVESTMENTS. The Company shall enforce or cause to be
enforced all provisions of any Eligible Participation, if the failure to enforce
any such provision or provisions (in the aggregate) would have a materially
adverse effect on the value of the Assigned Collateral or permit the mortgagor
under the related Eligible Mortgage Investment to interrupt, suspend or affect
the payments thereunder.
8.21 SERVICERS AND MORTGAGEES OF RECORD. The Company shall use
reasonable efforts to cause each Servicer and each mortgagee of record to comply
with the requirements of all Applicable Laws and the terms and provisions of the
relevant Servicing Agreement or Participation Agreement, as the case may be.
8.22 BOOKS AND RECORDS. The Company will keep, or cause to be kept,
adequate records and books of account, in which complete entries are to be made
reflecting its business and financial transactions, such entries to be made in
accordance with GAAP consistently applied in the case of financial transactions
or as otherwise required by applicable rules and regulations of any governmental
agency or regulatory authority (federal, state or local) having jurisdiction
over the Company or the transactions contemplated by this Agreement.
8.23 FURTHER ASSURANCE. As from time to time reasonably requested by
the Administrative Agent or a Lender, at the cost and expense of the Company,
execute and deliver to the Administrative Agent and the Lenders all such
documents and instruments and do all such other acts and things as may be
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reasonably required to enable the Administrative Agent and the Lenders to
exercise and enforce their respective rights under the Basic Documents and
record and file and rerecord and refile all such documents and instruments, at
such time or times, in such manner and at such place or places, all as may be
necessary to validate, preserve and protect the position of the Administrative
Agent and the Lenders under the Basic Documents. The Administrative Agent may,
and at the request of the Required Lenders shall, upon any extension of this
Agreement, request an opinion of counsel selected by the Company and approved by
the Administrative Agent, which approval shall not be unreasonably withheld or
delayed, with respect to action required to be taken for the protection of the
rights of the Administrative Agent and the Lenders under the Basic Documents.
Section 9. EVENTS OF DEFAULT. In case of the happening of any of the
following events (herein called "Events of Default"):
(a) The Company shall default in the payment (or prepayment) when due
of any principal of or interest on any Loan, any fee or any other amount
payable by it hereunder or under any Note; or
(b) The Company or any of its Subsidiaries shall default in the
payment when due of any amount of principal of or interest on any of its
other Indebtedness the aggregate amount of which other Indebtedness is
$5,000,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Indebtedness
shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in
full (whether by redemption, purchase, offer to purchase or otherwise),
prior to its stated maturity or to have the interest rate thereon reset to
a level so that securities evidencing such Indebtedness trade at the level
specified in relation to the par value thereof; or
(c) Any representation or warranty made or deemed made herein, in the
Security Agreement or in any other Basic Document (or in any modification
or supplement hereto or thereto) by the Company, or in any certificate,
agreement, instrument or written statement made or delivered pursuant to
the provisions hereof (or thereof), shall have been incorrect or misleading
as of the time made or furnished in any material respect; or
(d) The Company shall fail (i) to perform or observe any term,
covenant or agreement contained in Sections 8.01(h), the first clause of
8.03(a), 8.03(b), 8.07, 8.17
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and 8.19 of this Agreement or any term, covenant or agreement contained in
the Security Agreement, or (ii) to perform or observe any other term,
covenant or agreement contained in this Agreement or any other Basic
Document, and any such failure referred to in this clause (ii) shall remain
unremedied for five days after the Company has become aware of such default
or has received notice thereof;
(e) The Company or any of its Subsidiaries shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become
due; or
(f) The Company or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part
of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code (as
now or hereafter in effect), (iv) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or readjustment of debts, (v) fail to controvert
in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code,
or (vi) take any corporate action for the purpose of effecting any of the
foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the Company or any of its Subsidiaries, in any court of
competent jurisdiction, seeking (i) its liquidation, reorganization,
dissolution or winding-up, or the composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of the Company or such Subsidiary or of all or any substantial part of
its assets, or (iii) similar relief in respect of the Company or such
Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against the Company or such Subsidiary shall be entered in
an involuntary case under the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money in excess
of $100,000 in the aggregate shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against the
Company and/or any of its Subsidiaries and the same shall not be discharged
(or provision shall not be made for such discharge), or a stay of execution
thereof shall not be procured, within 60
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days from the date of entry thereof and the Company or the relevant
Subsidiary shall not, within said period of 60 days, or such longer period
during which execution of the same shall have been stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal; or
(i) Any of the Basic Documents shall, at any time after its execution
and delivery, for any reason cease to be in full force and effect in any
material respect (unless such occurrence is in accordance with its terms or
after payment thereof) or shall be declared to be null and void or the
validity or enforceability thereof shall be contested by the Company or the
Company shall deny that it has any or further liability or obligation
thereunder; or
(j) Any judgment, writ, warrant of attachment or execution or similar
process shall be issued or levied in respect of the Cash Collateral Account
and such judgment, writ, or similar process shall not be released, vacated,
stayed or fully-bonded within forty-five days after its issue or levy; or
(k) The Lien of the Security Agreement in favor of the Collateral
Agent shall cease to be a valid assignment of, and valid and perfected
first priority Lien upon and security interest in, the Assigned Collateral,
as security for the repayment of the Obligations, or such Lien shall cease
to be valid as against creditors of the Company; or
(l) The Company shall lose its status as a REIT (or a pass-through
entity which is not subject to taxation at the entity level), or CRI
Insured Mortgage Associates Advisor Limited Partnership shall give notice
of its intention to terminate or not renew its advisory agreement with the
Company or shall otherwise no longer act as advisor to the Company (unless
the REIT becomes self-administered); or
(m) An event or condition specified in Section 8.01(f) shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Company or any ERISA Affiliate shall incur or in the reasonable opinion
of the Required Lenders shall be likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) which
could, in the reasonable determination of the Required Lenders, have a
Material Adverse Effect; or
(n) The Company shall incur net losses for three (3) consecutive
fiscal quarters on either a GAAP or tax basis;
THEREUPON, at any time during the continuance of such event, the
Administrative Agent shall, upon the direction of the
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Required Lenders or, in the case of a Major Default, upon the direction of an
Electing Lender as provided (and as defined) below, by notice to the Company (a
"Termination Notice") (PROVIDED, that if an Event of Default specified in
Section 9(f) or 9(g) shall occur with respect to the Company, such notice shall
be deemed delivered and the results specified in clauses (i) and (ii) below
shall occur automatically without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company) terminate the Commitments and/or declare the principal amount then
Outstanding of, and the accrued interest on, the Loans and all other amounts
payable by the Company hereunder and under the Notes (including, without
limitation, any amounts payable under Section 5.05) to be forthwith due and
payable, whereupon (i) the Commitments shall terminate and/or (ii) all such
amounts shall be immediately due and payable, without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company; PROVIDED, that, if such event constitutes a Major Default
and the Required Lenders shall fail to give such direction within ten Business
Days after the occurrence thereof, the Administrative Agent shall, upon the
direction of any Lender (an "Electing Lender"), at the same or different times,
by notice to the Company and all the Lenders, terminate such Electing Lender's
Commitment and/or declare the principal amount then Outstanding of, and accrued
interest on, the Loans of such Electing Lender and all other amounts payable to
such Electing Lender by the Company hereunder and under the Notes held by such
Electing Lender (including, without limitation, any amounts payable under
Section 5.05 to such Electing Lender) to be forthwith due and payable, whereupon
(x) the Commitment of such Electing Lender shall terminate and/or (y) all such
amounts shall be immediately due and payable, without presentment, demand,
protest or other formalities of any kind, all of which are hereby expressly
waived by the Company; PROVIDED, FURTHER, that if the Administrative Agent has,
upon the direction of such Electing Lender, by notice to the Company taken the
action with the result specified in clause (y) and such Electing Lender has not
received full payment of all such amounts within ten Business Days after
delivery of such notice, such Electing Lender may direct the Administrative
Agent to give a Termination Notice.
Section 10. THE ADMINISTRATIVE AGENT.
10.01 APPOINTMENT, POWERS AND IMMUNITIES. Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder with such powers as are specifically delegated to the Administrative
Agent by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Administrative Agent (which term as used in
this sentence and in Section 10.05 and the first sentence of Section 10.06 shall
include reference to its affiliates and its own and its affiliates' officers,
directors, employees and agents): (a) shall have no duties or
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responsibilities except those expressly set forth in this Agreement, and shall
not by reason of this Agreement be a trustee for any Lender; (b) shall not be
responsible to the Lenders for any recitals, statements, representations or
warranties contained in this Agreement, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, any Note or any other document
referred to or provided for herein or for any failure by the Company or any
other Person to perform any of its obligations hereunder or thereunder;
(c) shall not be required to initiate or conduct any litigation or collection
proceedings hereunder; and (d) shall not be responsible for any action taken or
omitted to be taken by it hereunder or under any other document or instrument
referred to or provided for herein or in connection herewith, except for its own
gross negligence or willful misconduct. The Administrative Agent may employ
agents and attorneys-in-fact and shall not be responsible for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it in good faith.
The Administrative Agent may deem and treat the payee of any Note as the holder
thereof for all purposes hereof unless and until a notice of the assignment or
transfer thereof shall have been filed with the Administrative Agent, together
with the consent of the Company to such assignment or transfer.
10.02 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telegram or cable) believed by it to
be genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
For purposes of providing a certificate or statement as to amounts owing to a
Lender as provided in Section 4.3(c) of the Security Agreement, each Lender
shall provide a certificate or other statement to the Administrative Agent
setting forth such amounts and the Administrative Agent may exclusively rely on
such certificate or statement. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with
instructions given by the Required Lenders, and such instructions of such
Lenders and any action taken or failure to act pursuant thereto shall be binding
on all of the Lenders.
10.03 DEFAULTS. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default (other than the non-payment
of principal of or interest on Loans or of commitment fees) unless the
Administrative Agent has received notice from a Lender or the Company specifying
such Default and stating that such notice is a "Notice of Default". In the
event that the Administrative Agent receives such a notice
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of the occurrence of a Default, the Administrative Agent shall give prompt
notice thereof to the Lenders (and shall give each Lender prompt notice of each
such non-payment). The Administrative Agent shall (subject to Section 10.07 of
this Agreement and Section 6.1(e) of the Security Agreement) take such action
with respect to such Default as shall be directed by the Required Lenders,
PROVIDED, that, unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the Lenders except to
the extent that this Agreement expressly requires that such action be taken, or
not be taken, only with the consent or upon the authorization of the Required
Lenders, or all of the Lenders.
10.04 RIGHTS AS A LENDER. CIBC, (and any successor acting as
Administrative Agent) and its affiliates may (without having to account therefor
to any Lender) accept deposits from, lend money to and generally engage in any
kind of banking, trust or other business with the Company (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and CIBC, and its affiliates may accept fees and other consideration from
the Company for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
10.05 INDEMNIFICATION. The Lenders agree to defend, indemnify and
hold harmless the Administrative Agent (to the extent not reimbursed under
Section 11.03, but without limiting the obligations of the Company under Section
11.03) ratably in accordance with the aggregate principal amount of the Loans
held by the Lenders (or, if no Loans are at the time outstanding, ratably in
accordance with their respective Commitments), for any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Administrative Agent (including
by any Lender) arising out of or by reason of any investigation or any way
relating to or arising out of this Agreement or any other documents contemplated
by or referred to herein or the transactions contemplated hereby (including,
without limitation, the costs and expenses which the Company is obligated to pay
under Section 11.03 but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the performance
of its agency duties hereunder) or the enforcement of any of the terms hereof or
of any such other documents, provided that no Lender shall be liable for any of
the foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
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10.06 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Company and its Subsidiaries and decision to enter into this Agreement and that
it will, independently and without reliance upon the Administrative Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement. The Administrative Agent
shall not be required to keep itself informed as to the performance or
observance by the Company of this Agreement or any other document referred to or
provided for herein or to inspect the Properties or books of the Company or any
of its Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the affairs, financial condition or business of the Company or any of
its Subsidiaries (or any of their affiliates) which may come into the possession
of the Administrative Agent or any of its affiliates.
10.07 FAILURE TO ACT. Except for action expressly required of the
Administrative Agent hereunder, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall receive
further assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 10.05 against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
10.08 RESIGNATION OR REMOVAL OF ADMINISTRATIVE AGENT. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company, and the Administrative Agent may be removed at
any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Required Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a bank
which has an office in New York, New York with a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers,
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privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 10 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
Section 11. MISCELLANEOUS.
11.01 WAIVER. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
11.02 NOTICES. Except where telephonic (which shall be confirmed in
writing promptly) instructions or notices are authorized herein to be given, all
notices, demands, instructions and other communications required or permitted to
be given under this Agreement shall be in writing and shall be personally
delivered or sent by registered, certified or express mail, postage prepaid,
return receipt requested, or by prepaid telex, facsimile, TWX or telegram (with
messenger delivery specified in the case of a telegram), and shall be deemed to
be given for purposes of this Agreement on the date on which such writing is
delivered or sent to the intended recipient thereof in accordance with the
provisions of this Section 11.02 (except that any notice sent by registered or
certified mail shall be deemed to have been given on the fifth Business Day
after such notice is deposited for delivery in the United States mail). Unless
otherwise specified in a notice sent or delivered in accordance with the
foregoing provisions of this Section 11.02, notices, demands, instructions and
other communications in writing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective facsimile,
telex or TWX numbers) indicated below, in the case of the Company or the
Administrative Agent, and at the Address for Notices specified for each such
Lender in Schedule I in the case of any Lender, and, in the case of telephonic
instructions or notices, by calling the telephone number or numbers indicated
for such party below or in Schedule I, as the case may be:
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(a) with respect to the Company:
CRIIMI MAE Inc.
The CRI Building
11200 Rockville Pike
Rockville, Maryland 20852
Attention: Mr. William B. Dockser
Mr. Jay R. Cohen
Office of General Counsel
Telephone: (301) 468-9200
Facsimile: (301) 231-0396
(b) with respect to the Administrative Agent:
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Attention: Ms. Arlene Tellerman
Telephone: (212) 856-3695
Facsimile: (212) 856-3763
Any party may designate a different or additional address for the delivery of
notices by providing notice thereof to the other parties. Except as provided to
the contrary above, all notices, demands, and other communications shall be
effective upon personal delivery or upon the date of receipt by the addressee as
shown on the return receipt. Rejection or other refusal to accept notices,
demands, or other communications shall be of no effect, and all notices,
demands, and other communications which are rejected or acceptance of which is
refused shall be deemed to be effective upon the date on which the same were
rejected or refused.
11.03 EXPENSES, ETC. The Company agrees to pay or reimburse each of
the Lenders and the Administrative Agent for paying: (a) all reasonable out-of-
pocket costs and expenses of the Administrative Agent, including the reasonable
fees and expenses of LeBoeuf, Lamb, Greene & MacRae, special New York counsel to
the Administrative Agent, in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement, the Notes and the other Basic
Documents (whether or not any Loans are made hereunder, but subject to the terms
set forth in the Commitment Letter dated November 24, 1993 from the
Administrative Agent to the Company) and the making of the Loans hereunder and
(ii) any amendment, modification or waiver of any of the terms of this Agreement
or any of the Notes; (b) all reasonable fees and expenses of Debevoise &
Plimpton, special New York counsel to National Australia Bank Limited, New York
Branch, in connection with the negotiation, preparation, execution and delivery
of this Agreement, the Notes and the other Basic Documents; (c) all reasonable
fees and expenses of Shaw, Pittman, Potts & Trowbridge, counsel to Signet
Bank/Virginia, in connection with the negotiation, preparation, execution and
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delivery of this Agreement, the Notes and the other Basic Documents; (d) all
reasonable costs and expenses of the Lenders and the Administrative Agent
(including reasonable fees and expenses of counsel) in connection with (i) any
Default and any enforcement or collection proceedings resulting therefrom and
(ii) the enforcement of this Section 11.03; and (e) all transfer, stamp,
documentary or other similar taxes, assessments or charges levied by any
governmental or revenue authority in respect of this Agreement or any of the
Notes or any other document referred to herein.
11.04 AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement or the Security Agreement may be
amended, waived or modified only by an instrument in writing signed by the
Company, the Administrative Agent and the Required Lenders, or by the Company
and the Administrative Agent acting with the consent of the Required Lenders,
and any provision of this Agreement or the Security Agreement may be waived by
the Required Lenders or by the Administrative Agent acting with the consent of
the Required Lenders; PROVIDED, that no amendment, modification or waiver shall,
unless by an instrument signed by all of the Lenders or by the Administrative
Agent acting with the consent of all of the Lenders: (i) increase or extend the
term (except as provided in Section 2.09), or extend the time or waive any
requirement for the reduction or termination, of any of the Commitments,
(ii) waive, or extend the date fixed for, the payment of principal of or
interest on any Loan or any fee hereunder, (iii) reduce the amount of any such
payment of principal, (iv) reduce the rate at which interest is payable thereon
or any fee is payable hereunder, (v) release any Assigned Collateral other than
as may be provided in the Security Agreement, (vi) alter the terms of this
Section 11.04, (vii) amend the definition of the term "Required Lenders" or
amend or waive any requirement that all Lenders consent to any action, (viii)
waive any of the conditions precedent set forth in Section 6, (ix) amend or
waive the requirements set forth in the definitions of "Assigned Collateral",
"Borrowing Base", "Eligible Mortgage Investment", "Eligible Participation",
"Loan Value", "Qualified Investments" or "U.S. Mortgage-Backed Security" or (x)
amend or waive the covenants set forth in Sections 8.09, 8.10, 8.11 or 8.12; and
PROVIDED, further, that any amendment of Section 10 shall require the consent of
the Administrative Agent.
11.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 ASSIGNMENTS AND PARTICIPATIONS.
(a) The Company may not assign its rights or obligations hereunder or
under the Notes or under any other Basic Document without the prior consent of
all of the Lenders and the Administrative Agent.
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(b) Each Lender may assign in whole or in part any of its Commitments
(but only with the consent of the Company and the Administrative Agent, which
consent of the Company will not be unreasonably withheld), its Loans and its
Notes; provided that, (i) no such consent by the Company or the Administrative
Agent shall be required in the case of any assignment by a Lender to any of its
affiliates or to another Lender; (ii) any such partial assignment shall be in an
amount at least equal to $10,000,000; (iii) each such assignment by a Lender of
its Loans, Note, or Commitment shall be made in such manner so that the same
portion of its Loans, Note, and Commitment is assigned to the respective
assignee. Upon execution and delivery by the assignor and the assignee to the
Company and the Administrative Agent of a Lender Assignment Agreement
substantially in the form of Exhibit I pursuant to which such assignee agrees to
become a "Lender" hereunder (if not already a Lender) having the Commitment(s)
and Loans specified in such instrument, and upon consent thereto by the Company
and the Administrative Agent to the extent required above, the assignee shall
have, to the extent of such assignment (unless otherwise provided in such
assignment with the consent of the Company and the Administrative Agent), the
obligations, rights and benefits of a Lender hereunder holding the Commitment(s)
and Loans (or portions thereof) assigned to it (in addition to the Commitment(s)
and Loans, if any, theretofore held by such assignee) and the assigning Lender
shall, to the extent of such assignment, be released from the Commitment(s) (or
portion(s) thereof) so assigned. Upon each such assignment the assigning Lender
shall pay the Administrative Agent an assignment fee of $2,500.
(c) A Lender may sell or agree to sell to one or more other Persons a
participation in all or any part of any Loans held by it, or in its Commitments,
in which event each purchaser of a participation (a "Participant"), except as
otherwise provided in Section 4.07(c), shall not have any rights or benefits
under this Agreement or any Note (the Participant's rights against such Lender
in respect of such participation to be those set forth in the agreements
executed by such Lender in favor of the Participant). All amounts payable by
the Company to any Lender under Section 5 in respect of Loans held by it, and
its Commitments, shall be determined as if such Lender had not sold or agreed to
sell any participations in such Loans and Commitments, and as if such Lender
were funding each of such Loan and Commitments in the same way that it is
funding the portion of such Loan and Commitments in which no participations have
been sold. In no event shall a Lender that sells a participation agree with the
Participant to take or refrain from taking any action hereunder except that such
Lender may agree with the Participant that it will not, without the consent of
the Participant, agree to (i) increase or extend the term, or extend the time or
waive any requirement for the reduction or termination, of such Lender's related
Commitment, (ii) extend the date fixed for the payment of principal of or
interest on the
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related Loan or Loans or any portion of any fee hereunder payable to the
Participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the Participant, to a level below the rate at which the Participant
is entitled to receive such interest or fee, or (v) release Assigned Collateral.
(d) Anything in this Section 11.06 to the contrary notwithstanding,
any Lender may assign and pledge all or any portion of its Loans and its Notes
to any Federal Reserve Lender as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Lender. No such assignment shall release the
assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants).
11.07 SURVIVAL. The obligations of the Company under Sections 5.01,
5.05, 5.06 and 11.03 and the obligations of the Lenders under Section 10.05
shall survive the repayment of the Loans and the termination of the Commitments.
In addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit, herein or pursuant hereto shall survive the
making of such representation and warranty, and no Lender shall be deemed to
have waived, by reason of making any extension of credit hereunder, any Default
which may arise by reason of such representation or warranty proving to have
been false or misleading, notwithstanding that such Lender or the Administrative
Agent may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time such extension of
credit was made.
11.08 CAPTIONS. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. The Company hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
any New York state court sitting in New York City for the
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purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Company irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
11.11 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.12 ENTIRE AGREEMENT. This Agreement, the Notes and the other
Basic Documents embody the entire agreement among the Company, the
Administrative Agent and the Lenders relating to the subject matter hereof and
supersede all prior agreements, representations and understandings, if any,
relating to the subject matter hereof, including the Commitment Letter dated
November 24, 1993 from the Administrative Agent to the Company, except as
provided in Sections 2.04 and 11.03.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
CRIIMI MAE Inc.
By /s/ H. William Willoughby
---------------------------------
Name: H. William Willoughby
Title: President
Canadian Imperial Bank of Commerce,
New York Agency, as Administrative
Agent
By /s/ Daniel J. Conlon
---------------------------------
Name: Daniel J. Conlon
Title: Vice President
CIBC Inc., as Lender
By /s/ Gail M. Golightly
---------------------------------
Name: Gail M. Golightly
Title: Vice President
National Australia Bank Limited,
New York Branch, as Lender
By /s/ T. W. Hunersen
---------------------------------
Name: T. W. Hunersen
Title: Senior Vice President
Signet Bank/Virginia, as Lender
By /s/ Barry Cooper
---------------------------------
Name: Barry Cooper
Title: Vice President
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SCHEDULE I
COMMITMENTS, LENDERS' APPLICABLE LENDING OFFICES
AND ADDRESSES FOR NOTICES
Lenders, Lenders' Applicable Lending Offices
and Addresses for Notices Commitment
- -------------------------------------------- ----------
CIBC, INC. $50,000,000
a) Base Rate Loans Office:
425 Lexington Avenue
New York, New York 10017
b) LIBOR Loans Office:
425 Lexington Avenue
New York, New York 10017
c) Address for Notices:
CIBC, Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Ms. Arlene Tellerman
Telephone: (212) 856-3695
Facsimile: (212) 856-3763
NATIONAL AUSTRALIA BANK LIMITED,
NEW YORK BRANCH $40,000,000
a) Base Rate Loans Office:
200 Park Avenue - 34th Floor
New York, New York 10166
b) LIBOR Loans Office:
200 Park Avenue - 34th Floor
New York, New York 10166
c) Address for Notices:
National Australia Bank Limited,
New York Branch
200 Park Avenue - 34th Floor
New York, New York 10166
Attention: Mr. Thomas Kilfoyle
Telephone: (212) 916-9510
Facsimile: (212) 983-1969
<PAGE>
Lenders, Lenders' Applicable Lending Offices
and Addresses for Notices Commitment
- -------------------------------------------- ----------
SIGNET BANK/VIRGINIA $20,000,000
a) Base Rate Loans Office:
8330 Boone Boulevard
Vienna, Virginia 22182-2632
b) LIBOR Loans Office:
8330 Boone Boulevard
Vienna, Virginia 22182-2632
c) Address for Notices:
Signet Bank/Virginia
8300 Boone Boulevard
Vienna, Virginia 22182-2632
Attention: Mr. David H. Olson
Telephone: (301) 961-0066
Facsimile: (301 652-1174
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<PAGE>
SCHEDULE II
EXISTING INTEREST RATE HEDGE AGREEMENTS
<TABLE>
<CAPTION>
Hedging Notional
Instrument Amount Effective Date Maturity Date Floor Cap
- ---------- --------- -------------- ------------- ----- ---
<S> <C> <C> <C> <C> <C>
Collar $30,000,000 March 7, 1990 March 7, 1995 8.375% 10.125%
Collar 20,000,000 March 30, 1990 March 30, 1995 8.375% 10.125%
Collar 30,000,000 July 8, 1990 February 8, 1995 8.625% 10.625%
Accreting Collar 35,000,000 July 9, 1990 through July 9, 1995 8.750% 10.500%
December 9, 1990
Cap 25,000,000 May 24, 1991 May 24, 1996 N/A 9.000%
Cap 25,000,000 June 17, 1991 June 17, 1996 N/A 8.450%
Cap 50,000,000 June 25, 1993 June 25, 1998 N/A 6.500%
Cap 50,000,000 July 1, 1993 June 3, 1996 N/A 6.500%
Cap 50,000,000 July 20, 1993 July 20, 1998 N/A 6.250%
Cap 50,000,000 August 10, 1993 August 10, 1997 N/A 6.000%
Cap 50,000,000 August 27, 1993 August 27, 1997 N/A 6.125%
Cap 50,000,000 November 10, 1993 November 10, 1997 N/A 6.000%
Cap 35,000,000 February 2, 1994 February 2, 1999 N/A 6.125%
------------
$500,000,000
</TABLE>
<PAGE>
SCHEDULE III
<TABLE>
<CAPTION>
Subsidiary State of Incorporation % Ownership
- ---------- ---------------------- -----------
<S> <C> <C>
CRI Liquidating Maryland Approx. 57%
REIT, Inc.
CRIIMI, Inc. Maryland 100%
</TABLE>
The Company owns the stock of CRIIMI, Inc. free and clear of any
liens. The Company holds a total of 17,199,307 shares of CRI Liquidating REIT,
Inc. ("CRI Liquidating"), 15,374,000 of which were pledged as security for a
reducing term loan facility as of December 31, 1993.
CRIIMI, Inc. is the general partner of four publicly held limited
partnerships known as the American Insured Mortgage Investors Funds (the "AIM
Funds"), which general partner interests range from 2.9% to 4.9%. The Company,
through its 50% limited partnership interest in CRI/AIM Investment Limited
Partnership (CRI/AIM), owns a limited partnership interest in the Adviser to the
AIM Funds. (CRI/AIM owned a total limited partnership interest of 20% in AIM
Acquisition Partners, L.P., the Adviser.)
CRI Liquidating also owns equity interests in three limited
partnership ("Participations"), each of which owns property underlying a
Mortgage-Backed Security previously held by CRI Liquidating. Such
Participations represent less than 1% of CRI Liquidating's total assets.
<PAGE>
EXHIBIT A
[Form of Note]
PROMISSORY NOTE
$________________ ____________, 199_
New York, New York
FOR VALUE RECEIVED, CRIIMI MAE Inc., a Maryland corporation (the
"Company"), hereby promises to pay to_____________________________________ (the
"Lender"), for account of its respective Applicable Lending Offices provided for
by the Credit Agreement referred to below, at the office of Canadian Imperial
Bank of Commerce, New York Agency, 425 Lexington Avenue, New York, NY 10017, the
principal sum of ___________________________ Dollars (or such lesser amount as
shall equal the aggregate unpaid principal amount of the Loans made by the
Lender to the Company under the Credit Agreement), in lawful money of the United
States of America and in immediately available funds, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Loan, at such office, in like money and
funds, for the period commencing on the date of such Loan until such Loan shall
be paid in full, at the rates per annum and on the dates provided in the Credit
Agreement.
The date, amount, Type, interest rate, and duration of Interest Period
(if applicable) of each Loan made by the Lender to the Company, and each payment
made on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof.
This Note is one of the Notes referred to in the Revolving Credit
Agreement (as amended, modified and supplemented and in effect from time to
time, the "Credit Agreement") dated as of February 28, 1994, between the
Company, the Lenders named therein and Canadian Imperial Bank of Commerce, New
York Agency, as Administrative Agent, and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
-1-
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
CRIIMI MAE Inc.
By______________________
Title:
-2-
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made, Continued or Converted under the
within-described Credit Agreement to the Company, on the dates, in the principal
amounts, of the Types, bearing interest at the rates, and having Interest
Periods (if applicable) of the durations set forth below, subject to the
payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
<PAGE>
EXHIBIT B
[FORM OF NOTICE OF BORROWING]
NOTICE OF BORROWING
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Attention: [Name]
[Title]
Pursuant to Sections 2.02 and 4.05 of that certain Revolving Credit
Agreement dated as of February 28, 1994 (as it may be amended, supplemented,
restated or otherwise modified from time to time, the "Credit Agreement";
capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement) among CRIIMI MAE Inc., a Maryland corporation
(the "Company"), the Lenders listed on the signature pages thereof and Canadian
Imperial Bank of Commerce, New York Agency, as Administrative Agent, this
represents the Company's request to borrow on ______________ , 19__ from the
Lenders on a pro rata basis $__________ as [Base Rate/LIBOR Loans]. [The
initial Interest Period for such LIBOR Loans is requested to be a _____________
period.] The Company certifies that the sum of the amount of the proposed Loan
and the aggregate amount of Loans Outstanding immediately prior to such Loan,
will not exceed the lesser of (i) the aggregate amount of the Commitments then
in effect or (ii) the Borrowing Base then in effect. The Company requests that
the proceeds of such Loans be deposited in the Company's account, Account No.
__________, at____________.
The Company certifies that: i) no Default has occurred and is
continuing under the Basic Documents; ii) the representations and warranties
made by the Company in Section 7 of the Credit Agreement and in Section 3.1 of
the Security Agreement are true and complete on and as of the date hereof with
the same force and effect as if made on and as of the date hereof; and
iii) there has not occurred any change, or development or event involving a
prospective change, which could have a Material Adverse Effect. The Company
agrees that if, prior to the time of the borrowing requested hereby, any matter
certified to herein by the Company will not be true and correct at such time as
if then made, it will immediately notify the Administrative Agent. Except to
the extent, if any, that, prior to the time of the borrowing requested hereby
the Administrative Agent shall receive written notice to the contrary from the
Company, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such borrowing as if then made.
DATED:________________________
CRIIMI MAE Inc.
By:______________________
<PAGE>
EXHIBIT C
[FORM OF NOTICE OF CONVERSION OR CONTINUATION]
NOTICE OF CONVERSION OR CONTINUATION
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Attention: [Name]
[Title]
Pursuant to Sections 2.08 and 4.05 of that certain Revolving Credit
Agreement dated as of February 28, 1994 (as it may be amended, supplemented,
restated or otherwise modified from time to time, the "Credit Agreement";
capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement) among CRIIMI MAE Inc., a Maryland corporation
(the "Company"), the Lenders listed on the signature pages thereof, and Canadian
Imperial Bank of Commerce, New York Agency, as Administrative Agent for the
Lenders, this represents the Company's request to [convert $_________ in
principal amount of Outstanding Loans which accrue interest based on the Base
Rate to LIBOR Loans on _____________, 199__. The Interest Period for such LIBOR
Loans is requested to be a ___________ period.] [continue as LIBOR Loans
$__________ in principal amount of Outstanding Loans which accrue interest based
on the LIBO Rate with an Interest Period ending on ____________, 199___. The
Interest Period for such LIBOR Loans commencing on the last day of the Interest
Period referenced above is requested to be a __________ period.] [convert
$__________ in principal amount of Outstanding Loans which accrue interest based
on the LIBO Rate with an Interest Period ending on _______________, 19__ to Base
Rate Loans at the end of such Interest Period.]
The Company certifies that no Default has occurred and is continuing
under the Basic Documents or would result from the proposed [conversion]
[continuation] set forth above. The Company agrees that if, prior to the time
of the proposed [conversion] [continuation] set forth above, any matter
certified to herein by the Company will not be true and correct as of such time
as if then made, it will immediately notify the Administrative Agent.
Except to the extent, if any, that, prior to the time of the
continuation or conversion requested hereby, the Administrative Agent shall
receive written notice to the contrary from the Company, each matter certified
to herein shall be deemed once again to be certified as true and correct at the
date of such continuation or conversion as if then made.
DATED:________________________
CRIIMI MAE Inc.
By:______________________
<PAGE>
EXHIBIT D
CRIIMI MAE Inc.
Certificate
I, the undersigned, Secretary of CRIIMI MAE Inc., a Maryland
corporation (the "Company"), DO HEREBY CERTIFY that:
1. This Certificate is furnished pursuant to Sections 6.01(b) and
(c) of that certain Revolving Credit Agreement dated as of February 28,
1994 among the Company, Canadian Imperial Bank of Commerce, New York
Agency, as Administrative Agent, and CIBC, Inc., National Australia Bank
Limited, New York Branch, and Signet Bank/Virginia (collectively referred
to herein as the "Lenders") (said Revolving Credit Agreement, as in effect
on the date of this Certificate, being herein called the "Credit
Agreement"). Unless otherwise defined herein, capitalized terms used in
this Certificate have the meanings assigned to those terms in the Credit
Agreement.
2. Attached hereto as Exhibit A is a copy of the Certificate of
Incorporation of the Company, certified by the Secretary of State of the
State of Maryland.
3. There have been no amendments to the Certificate of Incorporation
of the Company since ___________ ,19__.(1)
4. Attached hereto as Exhibit B is a true and complete copy of the
by-laws of the Company as in effect on the date hereof.
5. Attached hereto as Exhibit C is a true
and complete copy of resolutions duly adopted by the Board of Directors of the
Company on ______________, 199_, authorizing the execution, delivery and
performance of the Basic Documents and the extensions of credit thereunder,
which resolutions have not been revoked, modified, amended or rescinded and are
still in full force and effect.
6. The below-named persons have been duly elected, have been duly
qualified as of and at all times since
_________________________
(1) Insert the date of the Secretary of State's Certificate furnished pursuant
to paragraph 2.
<PAGE>
___________, 199_(2) (to and including the date hereof) have been
officers of the Company, holding the respective offices below set opposite
their names, and the signatures below set opposite their names are their
genuine signatures.
Name Office Signatures
---- ------ ----------
_________________________ [Title] _________________________
_________________________ [Title] _________________________
_________________________ [Title] _________________________
7. I know of no proceeding for the dissolution or liquidation of the
Company or threatening its existence.
WITNESS my hand and the seal of the Company this ___ day of
________________ 199_.
CRIIMI MAE Inc.
By________________________________
Secretary or Assistant Secretary
_________________________
(2) Insert the date next preceding the effective date of adoption of the
resolutions referred to in paragraph 4 above.
-2-
<PAGE>
I, the undersigned, [Senior Officer] of the Company, DO HEREBY CERTIFY
that:
1. [Name of Secretary] is the duly elected and qualified Secretary
of the Company and the signature above is [his/her] genuine signature.
2. To the best of my knowledge, no Event of Default or Default has
occurred and is continuing, or would result from the consummation of the initial
extension of credit this date.
3. The representations and warranties made by the Company in Section
7 of the Credit Agreement and in Section 3.1 of the Security Agreement are true
and complete at and as of the date hereof with the same force and effect as if
made on and as of the date hereof.
4. To the best of my knowledge, there has not occurred any change,
or development or event involving a prospective change, which could have a
Material Adverse Effect.
WITNESS my hand on this ______ day of _____________ 199_.
CRIIMI MAE Inc.
By___________________________
[Senior Officer]
-3-
<PAGE>
EXHIBIT E
[Form of Opinion of Counsel to the Company]
[See Attached Draft]
-1-
<PAGE>
EXHIBIT F
COLLATERAL VALUATION CERTIFICATE
TO: Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
[_______________________
_______________________]
New York, New York _____
[Name and Address of Other Lenders]
Reference is made to the Revolving Credit Agreement dated as of
February 28, 1994 (as amended, supplemented or modified from time to time, the
"Agreement"), among CRIIMI MAE Inc., the Lenders parties thereto and you. All
capitalized terms which are not defined herein shall have the same meanings
herein as in the Agreement.
1. LOANS OUTSTANDING. As of the date hereof, the aggregate
principal balance of all Loans Outstanding is $______________.
2. ELIGIBLE PARTICIPATION SCHEDULE. Attached as Annex 1 is a
[revised] Eligible Participation Schedule, indicating thereon those Eligible
Participations for which CRIIMI MAE Inc. has pledged to the Collateral Agent
under the Security Agreement its undivided participation interest therein, all
of which are free and clear of all Liens, except as may be permitted by the
Agreement, which Schedule designates any Eligible Participations listed therein
for which an event of default of which CRIIMI MAE Inc. has or should have
knowledge of has occurred, or with the giving of notice or the passage of time,
will have occurred.
3. MORTGAGE-BACKED SECURITIES. Attached as Annex 2 is a [revised]
Mortgage-Backed Securities Schedule, indicating thereon Mortgage-Backed
Securities pledged to the Collateral Agent under the Security Agreement, all of
which are free and clear of all Liens, except as may be permitted by the
Agreement.
4. CASH COLLATERAL ACCOUNT. Attached as Annex 3 is a [revised]
Deposited Funds Schedule indicating, as of the date hereof, that the Loan Value
of the Deposited Funds is $______________.
<PAGE>
5. LOAN VALUE. As of the date hereof, the Loan Value of the
Eligible Participations described on the attached Eligible Participation
Schedule is $___________, the Loan Value of the Mortgage-Backed Securities
described on the attached Mortgage-Backed Securities Schedule is $___________
and the Loan Value of the Deposited Funds described on the attached Deposited
Funds Schedule is $__________, for an aggregate Loan Value of $__________
6. BORROWING BASE. As of the date hereof, the Borrowing Base is
$___________.
7. U.S. MORTGAGE-BACKED SECURITIES. As of the date hereof, the Loan
Value of U.S. Mortgage-Backed Securities is $___________.
IN WITNESS WHEREOF, CRIIMI MAE Inc. has caused this certificate to be
executed and delivered by its duly authorized officer this ____ day of
____________, 19__.
CRIIMI MAE Inc.
By_______________________________
Authorized Signatory
-2-
<PAGE>
ANNEX 1
ELIGIBLE PARTICIPATION SCHEDULE
Mortgage Investment Income Earned
<TABLE>
<CAPTION>
Guarantee
and
Effective Final Market Project
Purchase Coupon Interest Maturity Value of No. (if
Complex Name Location Price Rate Rate 1990 1991 1992 1993 Date Mortgages FHA)
- ------------ -------- -------- --------- -------- ---- ---- ---- ---- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
An asterisk designates the Eligible Participations for which an event of default
has occurred, or with the giving of notice or passage of time an event of
default will have occurred.
<PAGE>
ANNEX 2
MORTGAGE-BACKED SECURITIES SCHEDULE
<TABLE>
<CAPTION>
AMOUNT
OF UNPAID CURRENT
NAME OF COUPON PRINCIPAL BID VAL VALUE TYPE AND
PROPERTY RATE MATURITY BALANCES PRICE REF(1) (MARKET) POOL NO.
- -------- ------ -------- --------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C>
_________________________
(1) Represents the last day for which quotations were available as of the date
hereof.
</TABLE>
<PAGE>
ANNEX 3
DEPOSITED FUNDS SCHEDULE
<PAGE>
EXHIBIT G
UNENCUMBERED ASSET VALUATION CERTIFICATE
To: Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Reference is made to the Revolving Credit Agreement dated as of
February 28, 1994 (as amended, supplemented or modified from time to time, the
"Agreement"), between us and you. All capitalized terms which are not defined
herein shall have the same meanings herein as in the Agreement.
1. UNENCUMBERED ASSETS. As of the date hereof, the Value of the
Unencumbered Assets is $_______________________.
2. ELIGIBLE PARTICIPATION SCHEDULE. Attached as Annex 1 is an
Eligible Participation Schedule, indicating thereon those Eligible
Participations which are part of the Unencumbered Assets.
3. MORTGAGE-BACKED SECURITIES. Attached as Annex 2 is a Mortgage-
Backed Securities Schedule, indicating thereon Mortgage-Backed Securities which
are part of the Unencumbered Assets.
4. MISCELLANEOUS ASSETS. Attached as Annex 3 is a Miscellaneous
Asset Schedule, indicating thereon those assets of the Company consisting of
cash, investments of the type permitted in Section 5.4 of the Security Agreement
and stock of CRI Liquidating REIT, Inc. which, in each case, are part of the
Unencumbered Assets.
IN WITNESS WHEREOF, CRIIMI MAE Inc. has caused this certificate to be
executed and delivered by its duly authorized officer this ___ day of
______________, 199_.
CRIIMI MAE Inc.
BY:____________________________
AUTHORIZED SIGNATORY
<PAGE>
EXHIBIT H
Security Agreement
[To be inserted]
<PAGE>
EXHIBIT I
[FORM OF LENDER ASSIGNMENT AGREEMENT]
LENDER ASSIGNMENT AGREEMENT
To: CRIIMI MAE Inc.
The CRI Building
11200 Rockville Pike
Rockville, Maryland 20852
Canadian Imperial Bank of Commerce,
New York Agency, as Administrative Agent
425 Lexington Avenue
New York, New York 10017
Reference is made to Section 11.06(b) of that certain Revolving Credit
Agreement dated as of February 28, 1994 (as it may be amended, supplemented,
restated or otherwise modified from time to time, the "Credit Agreement";
capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement) among CRIIMI MAE Inc., a Maryland corporation
(the "Company"), the various financial institutions (the "Lenders") as are, or
shall from time to time become, parties thereto, and Canadian Imperial Bank of
Commerce, New York Agency, as administrative agent (in such capacity, the
"Administrative Agent").
This agreement is delivered to you pursuant to Section 11.06(b) of the
Credit Agreement and also constitutes notice to each of you, pursuant to such
Section, of the assignment and delegation to _________________ (the "Assignee")
of $_______ of the Loans Outstanding and Commitment of _______________ (the
"Assignor") under the Credit Agreement on the date hereof, and of a like
interest of all of the Assignor's rights and obligations under the Basic
Documents. After giving effect to the foregoing assignment and delegation, the
Assignor's and the Assignee's Commitment for the purposes of the Credit
Agreement are set forth opposite such Person's name on the signature pages
hereof.
[Add paragraph dealing with accrued interest and fees with respect to
Loans assigned.]
The Assignee hereby acknowledges and confirms that it has received a
copy of the Credit Agreement and the exhibits related thereto, together with
copies of the documents which were required to be delivered under the Credit
Agreement as a
<PAGE>
condition to the making of the Loans thereunder. The Assignee further confirms
and agrees that in becoming a Lender and in making its Commitment and Loans
under the Credit Agreement, such actions have and will be made without recourse
to, or representation or warranty by, the Administrative Agent or the Assignor.
Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Company and the Administrative Agent
(a) the Assignee
(i) shall be deemed automatically to have become a party to the
Credit Agreement, have all the rights and obligations of a "Lender"
under the Credit Agreement and the other Basic Documents as if it were
an original signatory thereto the extent specified in the second
paragraph hereof, and expressly confirms and ratifies the provisions
of Section 10 of the Credit Agreement;
(ii) agrees to be bound by the terms and conditions set forth in
the Credit Agreement and the other Basic Documents as if it were an
original signatory thereto; and
(b) the Assignor shall be released from its obligations under the
Credit Agreement and the other Basic Documents to the extent specified in
the second paragraph hereof.
The Assignor and the Assignee hereby agree that the [Assignor]
[Assignee] will pay to the Administrative Agent the assignment fee referred to
in Section 11.06(b) of the Credit Agreement upon the delivery hereof.
The Assignee, if a Non-U.S. Lender, agrees to furnish the tax forms
required by Section 5.06(f) of the Credit Agreement no later than the date of
acceptance hereof by the Administrative Agent.
The Assignee hereby advises each of you of the following
administrative details with respect to the assigned Loans and Commitment and
requests the Administrative Agent to acknowledge receipt of this document:
-2-
<PAGE>
(A) Address for Notices:
Institution Name:
Attention:
Domestic Office:
Telephone:
Facsimile:
Telex (Answerback):
LIBOR Office:
Telephone:
Facsimile:
Telex (Answerback):
(B) Payment Instructions:
This Agreement shall be governed by, and construed in accordance with,
the law of the State of New York.
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
Commitment [ASSIGNOR]
- ----------
$____________________ By:__________________________
Title:
[ASSIGNEE]
$____________________ By:__________________________
Title:
-3-
<PAGE>
Accepted and Acknowledged
this ____ day of __________, 19__
CANADIAN IMPERIAL BANK OF COMMERCE,
New York Agency, as Administrative Agent
By:_______________________________
Title:
CRIIMI MAE Inc.
By:_______________________________
Title:
-4-
<PAGE>
Exhibit 4(r)
<PAGE>
AMENDMENT AGREEMENT NO. 1
AMENDMENT AGREEMENT No. 1 dated as of June 1, 1994 ("Amendment
Agreement") among CRIIMI MAE Inc. (the "Company"), CIBC, Inc. ("CIBC"), NATIONAL
AUSTRALIA BANK LIMITED, NEW YORK BRANCH ("NAB"), SIGNET BANK/VIRGINIA
("Signet"), THE FUJI BANK, LTD., NEW YORK BRANCH ("Fuji"), BANK HAPOALIM
("Hapoalim"), (CIBC, NAB, Signet, Fuji and Hapoalim are referred to collectively
as the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as
administrative agent for the Lenders (the "Administrative Agent").
RECITALS
CIBC, NAB, Signet (collectively referred to as the "Existing
Lenders"), the Company and the Administrative Agent are parties to a Revolving
Credit Agreement dated as of February 28, 1994 (the "Credit Agreement") under
which the Existing Lenders have made Revolving Credit Loans (as defined therein)
to the Company;
The Revolving Credit Loans and the obligations of CRIIMI MAE are
secured under a Security Agreement dated as of February 28, 1994 among the
Company, the Administrative Agent and Chemical Bank as Collateral Agent (the
"Security Agreement"); and
The Company has requested, and the Lenders and the Administrative
Agent are willing to agree to, an amendment to the Credit Agreement to increase
the aggregate amount of the Commitments, and to add Fuji and Hapoalim as
Lenders, as set forth below.
Accordingly, the parties hereby agree as follows:
Section 1. DEFINITIONS. Capitalized terms used in this Amendment
Agreement and not otherwise defined herein shall have the respective meanings
assigned to them in the Credit Agreement.
Section 2. AMENDMENTS. Subject to the conditions of effectiveness
set forth in Section 4 of this Amendment Agreement, commencing as of August 5,
1994 (the "Effective Date") the Credit Agreement is amended as follows:
(a) References in the Credit Agreement (including references in
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein", and "hereof") shall be
deemed references to the Credit Agreement as amended hereby.
-2-
<PAGE>
(b) Commencing on the Effective Date: (i) each of Fuji and
Hapoalim shall be a "Lender" for all purposes of the Credit Agreement; (ii) each
of Fuji and Hapoalim hereby accepts and assumes all rights and obligations of a
"Lender" under the Credit Agreement; and (iii) without limiting the generality
of the foregoing, each of Fuji and Hapoalim confirm the appointment of the
Administrative Agent and the other agreements and representations set forth in
Section 10 of the Credit Agreement.
(c) Commencing on the Effective Date, the Commitments of the
Lenders, as listed on Schedule I to the Credit Agreement, are deleted, amended
and replaced with the Commitment amounts listed below:
Name of Lender Commitment
-------------- ----------
CIBC, Inc. $40,000,000
National Australia Bank Limited,
New York Branch $40,000,000
Signet Bank/Virginia $20,000,000
The Fuji Bank, Ltd.,
New York Branch $20,000,000
Bank Hapoalim $15,000,000
(d) As a result of the foregoing amendments, Schedule I to the
Credit Agreement is replaced in its entirety with a new Schedule I in the form
attached to this Amendment Agreement.
(e) Section 8.08 of the Credit Agreement is amended by
relettering the existing clause (vi) thereof as clause "(vii)" and by adding a
new clause (vi) as follows:
"(vi) Indebtedness pursuant to the Nomura Facilities up to a
maximum aggregate amount of Indebtedness under such facility of
$500,000,000;"
(f) Section 8.10 of the Credit Agreement is amended and replaced
in its entirety as follows:
"8.10 MINIMUM CONSOLIDATED SHAREHOLDERS' EQUITY. The Company
will not permit at any time Consolidated Shareholders' Equity to be less
than $150,000,000."
(g) The definition of "Total Liabilities" in Section 1.01 of the
Credit Agreement is amended and replaced in its entirety as follows:
-3-
<PAGE>
" "TOTAL LIABILITIES" shall mean at any time all Indebtedness of
the Company and its Consolidated Subsidiaries and all other liabilities of
the Company and its Subsidiaries which should be classified as liabilities
on a balance sheet of the Company and its Consolidated Subsidiaries
prepared in accordance with GAAP, except (i) trade accounts payable (other
than indebtedness for borrowed money related thereto) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 90 days of the date the respective
goods are delivered or the respective services are rendered, and (ii)
accrued interest (other than defaulted or post-default interest) payable
under this Agreement, the Nomura Facilities and the Signet Credit
Agreement."
Section 3. FEES AND EXPENSES.
(a) The Company shall pay to the Administrative Agent for
account of Fuji and Hapoalim on the Effective Date an up-front fee, as agreed by
the Company in the Additional Commitment Letter dated May 10, 1994 from the
Administrative Agent to the Company (which Letter is superseded by this
Amendment Agreement, except with respect to such fee), and the Administrative
Agent shall apply such fee for the account of each such Lender according to the
fee arrangement letter from the Administrative Agent to such Lenders.
(b) The Company shall pay to the Administrative Agent for
account of Fuji and Hapoalim on the Effective Date a commitment fee, based on
the increase in the aggregate amount of the Commitment effected by this
Amendment Agreement, for the period from and including the date of this
Amendment Agreement to but not including the earlier of (i) the Credit
Termination Date, or (ii) the Effective Date, at a rate of 1/4 of 1% per annum.
(c) The Company will pay on demand all out-of-pocket costs and
expenses of the Administrative Agent, including reasonable fees and out-of-
pocket expenses of counsel for the Administrative Agent, in connection with this
Amendment Agreement.
Section 4. CONDITIONS PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 of this Amendment Agreement shall become
effective as of the Effective Date if, and only if, the following conditions
shall have been fulfilled to the satisfaction of the Administrative Agent:
(a) the representations and warranties of the Company set forth
in Section 5 hereof, in Section 7 of the Credit Agreement and in Section 3.1 of
the Security Agreement shall be true and correct on the Effective Date with the
same force and effect as if made on and as of such date;
-4-
<PAGE>
(b) no Default or Event of Default under the Credit Agreement
shall have occurred and be continuing on the Effective Date;
(c) there shall not have occurred any change, or development or
event involving a prospective change, which in the opinion of the Required
Lenders (calculated to include Fuji and Hapoalim) could have a Material Adverse
Effect;
(d) the Company shall have delivered to the Administrative Agent
the following items, each of which shall be satisfactory to the Administrative
Agent in form and substance: (i) promissory notes of the Company (the "New
Notes") substantially in the form of Exhibit A to the Credit Agreement, dated
the Effective Date, payable to each of CIBC, Fuji and Hapoalim in a principal
amount equal to the amount of their respective Commitments as in effect on the
Effective Date and otherwise duly completed, PROVIDED that, the New Note payable
to CIBC shall be delivered with the understanding that the Administrative Agent
shall promptly cancel and return to the Company the promissory note to CIBC
dated February 28, 1994; (ii) a legal opinion addressed to the Lenders and the
Administrative Agent as to such matters as the Administrative Agent shall
reasonably request; (iii) a certificate of a senior officer of the Company
certifying as to (x) the items in paragraphs (a), (b) and (c) of this Section 4
of this Amendment Agreement, (y) the resolutions of the Board of Directors
relating to the execution, delivery and performance of this Amendment Agreement
and the Credit Agreement as amended hereby, and (z) the name and authorized
signature of each officer authorized to sign this Amendment Agreement;
(e) the Company, the Administrative Agent and all the Lenders
shall have executed this Amendment Agreement;
(f) the Company shall have paid to the Administrative Agent the
fees and expenses set forth in Section 3 of this Amendment Agreement; and
(g) the Company shall have complied with any other reasonable
request of the Administrative Agent or any Lender.
Section 5. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to the Administrative
Agent and the Lenders that: (i) the execution, delivery and performance of this
Amendment Agreement and the New Notes have been duly authorized by all necessary
corporate action on its part and do not and will not (1) violate any provision
of law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award as currently in effect to which it is subject or of its
certificate of incorporation or by-laws,
-5-
<PAGE>
(2) result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which it is a
party or by which it or any of its properties is bound, (3) result in, or
require, the creation or imposition of any mortgage, deed of trust, assignment,
pledge, Lien, security interest or other charge or encumbrance of any nature
upon or with respect to any of its properties, (4) require any authorization,
consent, approval, license, exemption of or filing with any commission, board,
bureau, agency or instrumentality or (5) require the consent of any other
Person; (ii) each of this Amendment Agreement and the New Notes constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the rights of creditors generally and to equitable
principles, and (iii) no Default or Event of Default under the Credit Agreement
or the Security Agreement exists or will result from the transactions
contemplated hereunder.
(b) The Company acknowledges, ratifies and confirms as of the
Effective Date the security interest granted to the Collateral Agent for the
benefit of the Secured Parties under the Security Agreement.
Section 6. MISCELLANEOUS.
(a) This Amendment Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(b) Except at expressly set forth herein, the Credit Agreement,
the Notes, the Security Agreement and all other related documents shall remain
unmodified and in full force and effect. The execution, delivery and
effectiveness of this Amendment Agreement shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the
Company, any Lender or the Administrative Agent under any of the Credit
Agreement, the Notes, the Security Agreement or any related document, nor,
except as expressly provided herein, constitute a waiver of any provision of any
such document.
(c) Subject to the conditions precedent in Section 4 of this
Amendment Agreement, by its signature hereunder, Chemical Bank, as Collateral
Agent, acknowledges the status of Fuji and Hapoalim as Lenders as of the
Effective Date.
(d) This Amendment Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
CRIIMI MAE INC.
/s/ Jay R. Cohen
----------------------------------
By: Jay R. Cohen
Title: Executive Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY,
as Administrative Agent
/s/ Daniel J. Conlon
----------------------------------
By: Daniel J. Conlon
Title: Vice President
CIBC, INC.,
as Lender
/s/ Lou Ann Bowers
----------------------------------
By: Lou Ann Bowers
Title: Vice President
NATIONAL AUSTRALIA BANK
LIMITED, NEW YORK BRANCH,
as Lender
/s/ Tom Kilfoyle
----------------------------------
By: Tom Kilfoyle
Title: Vice President
SIGNET BANK/VIRGINIA,
as Lender
/s/ Barry Cooper
----------------------------------
By: Barry Cooper
Title: Vice President
-7-
<PAGE>
THE FUJI BANK, LTD., NEW YORK BRANCH, as
Lender
/s/ Takashi Nagao
----------------------------------
By: Takashi Nagao
Title: Vice President and Manager
BANK HAPOALIM,
as Lender
/s/ Andrew J. Niesen
----------------------------------
By: Andrew J. Niesen
Title: Vice President
ACKNOWLEDGED:
CHEMICAL BANK, as
Collateral Agent
/s/ P. Morabito
- -------------------------------
By: P. Morabito
Title: Senior Trust Officer
-8-
<PAGE>
SCHEDULE I
COMMITMENTS, LENDERS' APPLICABLE LENDING OFFICES
AND ADDRESSES FOR NOTICES
Lenders, Lenders' Applicable Lending Offices
and Addresses for Notices Commitment
- -------------------------------------------- ----------
CIBC, INC. $40,000,000
a) Base Rate Loans Office:
425 Lexington Avenue
New York, New York 10017
b) LIBOR Loans Office:
425 Lexington Avenue
New York, New York 10017
c) Address for Notices:
CIBC, Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Ms. Arlene Tellerman
Telephone: (212) 856-3695
Facsimile: (212) 856-3763
NATIONAL AUSTRALIA BANK LIMITED,
NEW YORK BRANCH $40,000,000
a) Base Rate Loans Office:
200 Park Avenue - 34th Floor
New York, New York 10166
b) LIBOR Loans Office:
200 Park Avenue - 34th Floor
New York, New York 10166
c) Address for Notices:
National Australia Bank Limited,
New York Branch
200 Park Avenue - 34th Floor
New York, New York 10166
Attention: Mr. Thomas Kilfoyle
Telephone: (212) 916-9510
Facsimile: (212) 983-1969
<PAGE>
Lenders, Lenders' Applicable Lending Offices
and Addresses for Notices Commitment
- -------------------------------------------- ----------
SIGNET BANK/VIRGINIA $20,000,000
a) Base Rate Loans Office:
8330 Boone Boulevard
Vienna, Virginia 22182-2632
b) LIBOR Loans Office:
8330 Boone Boulevard
Vienna, Virginia 22182-2632
c) Address for Notices:
Signet Bank/Virginia
8300 Boone Boulevard
Vienna, Virginia 22182-2632
Attention: Mr. Barry E. Cooper
Telephone: (301) 961-0067
Facsimile: (301) 652-1174
THE FUJI BANK, LTD. $20,000,000
NEW YORK BRANCH
a) Base Rate Loans Office:
Two World Trade Center
New York, New York 10048
b) LIBOR Loans Office:
Two World Trade Center
New York, New York 10048
c) Address for Notices:
The Fuji Bank, Ltd
Two World Trade Center
New York, New York 10048
Attention: Ms. Kathleen Barsotti
Telephone: (212) 898-2065
Facsimile: (212) 912-0516
-2-
<PAGE>
Lenders, Lenders' Applicable Lending Offices
and Addresses for Notices Commitment
- -------------------------------------------- ----------
BANK HAPOALIM $15,000,000
a) Base Rate Loans Office:
1515 Market Street
Philadelphia, Pennsylvania 19102
b) LIBOR Loans Office:
1515 Market Street
Philadelphia, Pennsylvania 19102
c) Address for Notices:
Bank Hapoalim
1515 Market Street
Philadelphia, Pennsylvania 19102
Attention: Mr. Andrew J. Niesen
cc: Mr. Frank McEntee
Telephone: (215) 665-2239 (Niesen)
(215) 665-2249 (McEntee)
Facsimile: (215) 665-2217
-3-
<PAGE>
PROMISSORY NOTE
$40,000,000 August 5, 1994
New York, New York
FOR VALUE RECEIVED, CRIIMI MAE Inc., a Maryland corporation (the
"Company"), hereby promises to pay to CIBC, Inc. (the "Lender"), for account of
its respective Applicable Lending Offices provided for by the Credit Agreement
referred to below, at the office of Canadian Imperial Bank of Commerce, New York
Agency, 425 Lexington Avenue, New York, NY 10017, the principal sum of Forty
Million Dollars (or such lesser amount as shall equal the aggregate unpaid
principal amount of the Loans made by the Lender to the Company under the Credit
Agreement), in lawful money of the United States of America and in immediately
available funds, on the dates and in the principal amounts provided in the
Credit Agreement, and to pay interest on the unpaid principal amount of each
such Loan, at such office, in like money and funds, for the period commencing on
the date of such Loan until such Loan shall be paid in full, at the rates per
annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, and duration of Interest Period
(if applicable) of each Loan made by the Lender to the Company, and each payment
made on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof.
This Note is one of the Notes referred to in the Revolving Credit
Agreement (as amended, modified and supplemented and in effect from time to
time, the "Credit Agreement") dated as of February 28, 1994, between the
Company, the Lenders named therein and Canadian Imperial Bank of Commerce, New
York Agency, as Administrative Agent, and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
CRIIMI MAE Inc.
By
----------------------
Title:
-2-
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made, Continued or Converted under the
within-described Credit Agreement to the Company, on the dates, in the principal
amounts, of the Types, bearing interest at the rates, and having Interest
Periods (if applicable) of the durations set forth below, subject to the
payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
-3-
<PAGE>
PROMISSORY NOTE
$20,000,000 August 5, 1994
New York, New York
FOR VALUE RECEIVED, CRIIMI MAE Inc., a Maryland corporation (the
"Company"), hereby promises to pay to The Fuji Bank, Ltd., New York Branch (the
"Lender"), for account of its respective Applicable Lending Offices provided for
by the Credit Agreement referred to below, at the office of Canadian Imperial
Bank of Commerce, New York Agency, 425 Lexington Avenue, New York, NY 10017, the
principal sum of Twenty Million Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Lender to the
Company under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, and duration of Interest Period
(if applicable) of each Loan made by the Lender to the Company, and each payment
made on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof.
This Note is one of the Notes referred to in the Revolving Credit
Agreement (as amended, modified and supplemented and in effect from time to
time, the "Credit Agreement") dated as of February 28, 1994, between the
Company, the Lenders named therein and Canadian Imperial Bank of Commerce, New
York Agency, as Administrative Agent, and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
CRIIMI MAE Inc.
By
----------------------
Title:
-2-
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made, Continued or Converted under the
within-described Credit Agreement to the Company, on the dates, in the principal
amounts, of the Types, bearing interest at the rates, and having Interest
Periods (if applicable) of the durations set forth below, subject to the
payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
-3-
<PAGE>
PROMISSORY NOTE
$15,000,000 August 5, 1994
New York, New York
FOR VALUE RECEIVED, CRIIMI MAE Inc., a Maryland corporation (the
"Company"), hereby promises to pay to Bank Hapoalim (the "Lender"), for account
of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the office of Canadian Imperial Bank of
Commerce, New York Agency, 425 Lexington Avenue, New York, NY 10017, the
principal sum of Fifteen Million Dollars (or such lesser amount as shall equal
the aggregate unpaid principal amount of the Loans made by the Lender to the
Company under the Credit Agreement), in lawful money of the United States of
America and in immediately available funds, on the dates and in the principal
amounts provided in the Credit Agreement, and to pay interest on the unpaid
principal amount of each such Loan, at such office, in like money and funds, for
the period commencing on the date of such Loan until such Loan shall be paid in
full, at the rates per annum and on the dates provided in the Credit Agreement.
The date, amount, Type, interest rate, and duration of Interest Period
(if applicable) of each Loan made by the Lender to the Company, and each payment
made on account of the principal thereof, shall be recorded by the Lender on its
books and, prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof.
This Note is one of the Notes referred to in the Revolving Credit
Agreement (as amended, modified and supplemented and in effect from time to
time, the "Credit Agreement") dated as of February 28, 1994, between the
Company, the Lenders named therein and Canadian Imperial Bank of Commerce, New
York Agency, as Administrative Agent, and evidences Loans made by the Lender
thereunder. Capitalized terms used in this Note have the respective meanings
assigned to them in the Credit Agreement.
<PAGE>
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Loans
upon the terms and conditions specified therein.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
CRIIMI MAE Inc.
By
----------------------
Title:
-2-
<PAGE>
SCHEDULE OF LOANS
This Note evidences Loans made, Continued or Converted under the
within-described Credit Agreement to the Company, on the dates, in the principal
amounts, of the Types, bearing interest at the rates, and having Interest
Periods (if applicable) of the durations set forth below, subject to the
payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
-3-
<PAGE>
NOTICE OF BORROWING
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue
New York, New York 10017
Attention:
Pursuant to Sections 2.02 and 4.05 of that certain Revolving Credit
Agreement dated as of February 28, 1994 (as it may be amended, supplemented,
restated or otherwise modified from time to time, the "Credit Agreement";
capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement) among CRIIMI MAE Inc., a Maryland corporation
(the "Company"), the Lenders listed on the signature pages thereof and Canadian
Imperial Bank of Commerce, New York Agency, as Administrative Agent, this
represents the Company's request to borrow on ______________ , 19__ from the
Lenders on a pro rata basis $__________ as [Base Rate/LIBOR Loans]. [The
initial Interest Period for such LIBOR Loans is requested to be a _____________
period.] The Company certifies that the sum of the amount of the proposed Loan
and the aggregate amount of Loans Outstanding immediately prior to such Loan,
will not exceed the lesser of (i) the aggregate amount of the Commitments then
in effect or (ii) the Borrowing Base then in effect. The Company requests that
the proceeds of such Loans be deposited in the Company's account, Account No.
__________, at____________.
The Company certifies that: i) no Default has occurred and is
continuing under the Basic Documents; ii) the representations and warranties
made by the Company in Section 7 of the Credit Agreement and in Section 3.1 of
the Security Agreement are true and complete on and as of the date hereof with
the same force and effect as if made on and as of the date hereof; and
iii) there has not occurred any change, or development or event involving a
prospective change, which could have a Material Adverse Effect. The Company
agrees that if, prior to the time of the borrowing requested hereby, any matter
certified to herein by the Company will not be true and correct at such time as
if then made, it will immediately notify the Administrative Agent. Except to
the extent, if any, that, prior to the time of the borrowing requested hereby
the Administrative Agent shall receive written notice to the contrary from the
Company, each matter certified to herein shall be deemed once again to be
certified as true and correct at the date of such borrowing as if then made.
DATED: August 5, 1994
CRIIMI MAE Inc.
By:
----------------------
<PAGE>
Exhibit 4(s)
<PAGE>
AMENDMENT AGREEMENT NO. 2
AMENDMENT AGREEMENT No. 2 dated as of December 9, 1994 ("Amendment
Agreement") among CRIIMI MAE Inc. (the "Company"), CIBC INC. ("CIBC"), NATIONAL
AUSTRALIA BANK LIMITED, NEW YORK BRANCH ("NAB"), SIGNET BANK/VIRGINIA
("Signet"), THE FUJI BANK, LTD., NEW YORK BRANCH ("Fuji"), BANK HAPOALIM
("Hapoalim"), (CIBC, NAB, Signet, Fuji and Hapoalim are referred to collectively
as the "Lenders") and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as
administrative agent for the Lenders (the "Administrative Agent").
RECITALS
The Lenders, the Company and the Administrative Agent are parties to a
Revolving Credit Agreement dated as of February 28, 1994, as amended by
Amendment Agreement No. 1 dated as of June 1, 1994, (the "Credit Agreement")
under which the Lenders have made Loans (as defined therein) to the Company;
The Revolving Credit Loans and the obligations of CRIIMI MAE are
secured under a Security Agreement dated as of February 28, 1994 among the
Company, the Administrative Agent and Chemical Bank as Collateral Agent (the
"Security Agreement"); and
The Company has requested, and the Lenders and the Administrative
Agent are willing to agree to, an amendment to the Credit Agreement to modify
certain covenants, expressly permit conversion by the Company to a self-
administered REIT under certain circumstances and reduce the Commitments and
Outstanding Loans (as defined therein) by December 31, 1995, as set forth below.
Accordingly, the parties hereby agree as follows:
Section 1. DEFINITIONS. Capitalized terms used in this Amendment
Agreement and not otherwise defined herein shall have the respective meanings
assigned to them in the Credit Agreement.
Section 2. AMENDMENTS. Subject to the conditions of effectiveness
set forth in Section 4 of this Amendment Agreement, commencing as of December
12, 1994 (the "Effective Date") the Credit Agreement is amended as follow
(a) References in the Credit Agreement (including references in
the Credit Agreement as amended hereby) to "this Agreement" (and indirect
references such as "hereunder", "hereby", "herein", and "hereof") shall be
deemed references to the Credit Agreement as amended hereby.
-2-
<PAGE>
(b) The definition of "Fixed Charge Coverage Ratio" in Section
1.01 of the Credit Agreement is amended and replaced in its entirety as follows:
""FIXED CHARGE COVERAGE RATIO" shall mean, for any fiscal quarter, the
ratio of (i) net income of the Company and its Subsidiaries (calculated
before extraordinary items, taxes, amortization expenses, depreciation
expenses and the interest expenses specified in clause (ii) hereof) for
such fiscal quarter to (ii) the aggregate amount of all interest expense in
respect of Indebtedness of the Company and its Subsidiaries (excluding
amortization of deferred financing costs) accrued during such fiscal
quarter (whether or not actually paid during such fiscal quarter)
determined in accordance with GAAP."
(c) Section 2.03 of the Credit Agreement is amended by adding a
new subsection (d) as follows:
"(d) The aggregate amount of the Commitments shall be
automatically reduced to $85,000,000 on December 31, 1995 and such reduction
shall be applied to the respective relevant Commitments of the Lenders, pro rata
in accordance with Section 4.02."
(d) Section 2.08 of the Credit Agreement is amended by adding a
new subsection (c) as follows:
"(c) On or before December 31, 1995, the Company shall prepay the
Loans, together with accrued interest and any amounts due under
Section 5.05, in an amount necessary to reduce the Outstanding Loans to an
amount not in excess of the aggregate amount of the Commitments as reduced
pursuant to Section 2.03(d)."
(e) Section 4.04 of the Credit Agreement is amended by deleting
and replacing the first clause of the first sentence through the first comma
before the word "each" as follows:
"Except for prepayments made pursuant to Sections 2.08(b) or
(c) or Conversions made pursuant to Section 5.04,"
(f) Section 7.20 of the Credit Agreement is amended and replaced
in its entirety as follows:
"7.20 REIT ADVISOR. As of any date prior to the Company
providing notice to the Administrative
-3-
<PAGE>
Agent of a termination or non-renewal directly relating to the conversion
of the Company to a self-administered REIT, neither the Company nor CRI
Insured Mortgage Associates Advisor Limited Partnership has given notice of
its intention to terminate or not renew the advisory agreement between such
parties and such agreement remains in full force and effect."
(g) Section 8.05 of the Credit Agreement is amended by adding
the following parenthetical clause in subsection (iii) after the word "Person"
and before the word "if" in the second line: "(including any such transaction
to effectuate the conversion by the Company to a self-administered REIT)".
(h) Section 8.07 of the Credit Agreement is amended by deleting
and replacing clauses (iv) and (v) in their entirety and by adding new clauses
(iv), (v), (vi) and (vii) after clause (iii) as follows:
"(iv) Liens securing the Nomura Facilities, or such other
facilities which may replace all or a part of the Nomura Facilities
with substantially similar collateral; (v) Liens pursuant to the
Amended and Restated Collateral Pledge Agreement dated December 29,
1992 securing the Signet Credit Agreement, or such other agreement
which may replace such pledge agreement with substantially similar
collateral; (vi) Liens securing the Indebtedness permitted by clause
(vii) of Section 8.08; PROVIDED, that the collateral securing such
Indebtedness will consist solely of the asset being financed; and
(vii) Liens securing the Indebtedness permitted by clause (viii) of
Section 8.08; PROVIDED, that the collateral securing such Indebtedness
will consist solely of shares of stock in CRI Liquidating REIT, Inc."
(i) Section 8.08 of the Credit Agreement is amended by
relettering the existing clause (vii) thereof as clause "(x)" and by adding new
clauses (vii), (viii) and (ix) after clause (vi) as follows:
"(vii) Indebtedness for the financing of mortgage
investments (other than Assigned Collateral) up to a maximum aggregate
amount of Indebtedness for such purpose of $50,000,000; (viii)
Indebtedness not in excess of $10,000,000 for a working capital line;
(ix) Indebtedness under agreements which replace all or part of the
Indebtedness permitted by clause (v) or (vi) above in a maximum
aggregate amount not to exceed the respective amounts permitted by
such clauses."
-4-
<PAGE>
(j) Section 8.11 of the Credit Agreement is amended and replaced
in its entirety as follows:
"8.11 MAXIMUM TOTAL LIABILITIES. The Company will not permit at
any time the ratio of Total Liabilities to Consolidated Shareholders'
Equity to exceed 3.0 to 1.0."
(k) Section 8.12 of the Credit Agreement is amended and replaced
in its entirety as follows:
"8.12 FIXED CHARGE COVERAGE.
(a) The Company will not, as at the end of any fiscal
quarter through September 30, 1995, permit the Fixed Charge Coverage
Ratio to be less than 1.35 to 1.0.
(b) The Company will not, as at the end of any fiscal
quarter after September 30, 1995, permit the Fixed Charge Coverage
Ratio to be less than 1.40 to 1.0."
(l) Section 8.17 of the Credit Agreement is amended and replaced
in its entirety as follows:
"8.17 LINES OF BUSINESS. The Company will continue, and cause
each of its Subsidiaries to continue, to engage in a business of the same
general type as conducted by the Company or its Subsidiaries on the date of
this Agreement (i.e., directly or indirectly investing in federally insured
residential and multi-family mortgage investments); PROVIDED, that the
Company may establish a Subsidiary, or fund or guaranty affiliates or
special purpose corporations, to engage in other related lines of business
(including activities directly related to the conversion of the Company to
a self-administered REIT) if such engagement would not have a Material
Adverse Effect or adversely effect the REIT status of the Company;
PROVIDED, however, that (x) at no time shall the aggregate amount of
investments of the Company in any such Subsidiary or other entity exceed 10
percent of the total assets of the Company, as at the end of the most
recent fiscal quarter and set forth in the consolidated balance sheets of
the Company delivered pursuant to Section 8.01 and (y) if the Company
converts to a self-administered REIT, it shall deliver to the
Administrative Agent copies of documents effectuating such conversion, a
certificate of a senior officer of the Company certifying that no Default
or Event of Default under the Credit Agreement has occurred and is
continuing and an opinion of outside counsel to the Company addressed to
the Administrative Agent and the Lenders as to the Company's
-5-
<PAGE>
status as a qualified REIT and such other matters as the Administrative
Agent shall reasonably request."
(m) Section 8.18 of the Credit Agreement is amended by adding
the following parenthetical clause in proviso (y) after the word "services" and
before the word "or" in the seventeenth line: "(including any such services
directly related to the conversion of the Company to a self-administered REIT)".
Section 3. FEES AND EXPENSES.
(a) The Company shall pay to the Administrative Agent for
account of the Lenders based upon their respective Commitments on the Effective
Date an up-front fee, equal to 1/20 of 1% of the Commitments.
(b) The Company shall pay to the Administrative Agent for its
own account an administrative fee, as agreed by the Company in the Term Sheet of
Proposed Amendments Letter dated November 18, 1994 from the Administrative Agent
to the Company (which Letter is superseded by this Amendment Agreement, except
with respect to the fee).
(c) The Company will pay on demand all out-of-pocket costs and
expenses of the Administrative Agent, including reasonable fees and
disbursements of counsel for the Administrative Agent, in connection with this
Amendment Agreement.
Section 4. CONDITIONS PRECEDENT. The amendments to the Credit
Agreement set forth in Section 2 of this Amendment Agreement shall become
effective as of the Effective Date if, and only if, the following conditions
shall have been fulfilled to the satisfaction of the Administrative Agent:
(a) the representations and warranties of the Company set forth
in Section 5 hereof, in Section 7 of the Credit Agreement and in Section 3.1 of
the Security Agreement shall be true and correct with the same force and effect
as if made on and as of such date;
(b) no Default or Event of Default under the Credit Agreement
shall have occurred and be continuing;
(c) there shall not have occurred any change, or development or
event involving a prospective change, which in the opinion of the Required
Lenders could have a Material Adverse Effect;
(d) the Company shall have delivered to the Administrative Agent
certificates of a senior officer of the
-6-
<PAGE>
Company dated as of the Effective Date and dated as of the date on which all
parties shall have executed this Amendment Agreement certifying as to (i) the
items in paragraphs (a), (b) and (c) of this Section 4 of this Amendment
Agreement, (ii) the resolutions of the Board of Directors of the Company
relating to the execution, delivery and performance of this Amendment Agreement
and the Credit Agreement as amended hereby, and (iii) the name and authorized
signature of each officer authorized to sign this Amendment Agreement;
(e) the Company, the Administrative Agent and all the Lenders
shall have executed this Amendment Agreement;
(f) the Company shall have paid to the Administrative Agent the
fees and expenses set forth in Section 3 of this Amendment Agreement; and
(g) the Company shall have complied with any other reasonable
request of the Administrative Agent or any Lender.
Section 5. REPRESENTATIONS AND WARRANTIES. The Company represents
and warrants to the Administrative Agent and the Lenders that:
(a) the execution, delivery and performance of this Amendment
Agreement has been duly authorized by all necessary corporate action on its part
and do not and will not (i) violate any provision of law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award as currently
in effect to which it is subject or of its certificate of incorporation or by-
laws, (ii) result in a breach of or constitute a default under any indenture or
loan or credit agreement or any other agreement, lease or instrument to which it
is a party or by which it or any of its properties is bound, (iii) result in, or
require, the creation or imposition of any mortgage, deed of trust, assignment,
pledge, Lien, security interest or other charge or encumbrance of any nature
upon or with respect to any of its properties, (iv) require any authorization,
consent, approval, license, exemption of or filing with any commission, board,
bureau, agency or instrumentality or (v) require the consent of any other
Person;
(b) this Amendment Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the rights of creditors generally and to equitable principles; and
(c) no Default or Event of Default under the Credit Agreement
exists or will result from the execution of this Amendment Agreement.
-7-
<PAGE>
Section 6. MISCELLANEOUS.
(a) This Amendment Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(b) Except as expressly set forth herein, the Credit Agreement,
the Notes, the Security Agreement and all other related documents shall remain
unmodified and in full force and effect. The execution, delivery and
effectiveness of this Amendment Agreement shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the
Company, any Lender or the Administrative Agent under any of the Credit
Agreement, the Notes, the Security Agreement or any related document, nor,
except as expressly provided herein, constitute a waiver of any provision of any
such document.
(c) This Amendment Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment Agreement as of the
date first above written.
CRIIMI MAE INC.
/s/ William B. Dockser
----------------------------------
By: William B. Dockser
Title: Chairman of the Board
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY,
as Administrative Agent
/s/ Daniel J. Conlon
----------------------------------
By: Daniel J. Conlon
Title: Vice President
CIBC INC.,
as Lender
/s/ Lu Ann Bowers
----------------------------------
By: Lu Ann Bowers
Title: Vice President
NATIONAL AUSTRALIA BANK
LIMITED, NEW YORK BRANCH,
as Lender
/s/ Thomas Kilfoyle
----------------------------------
By: Thomas Kilfoyle
Title: Vice President
SIGNET BANK/VIRGINIA,
as Lender
/s/ Barry E. Cooper
----------------------------------
By: Barry E. Cooper
Title: Vice President
THE FUJI BANK, LTD., NEW YORK
BRANCH, as Lender
/s/ Takashi Nagao
----------------------------------
By: Takashi Nagao
Title: Vice President and Manager
BANK HAPOALIM,
as Lender
/s/ Jonathan Kulka
----------------------------------
By: Jonathan Kulka
Title: FVP and Branch Manager
/s/ Joseph Petrone
----------------------------------
By: Joseph Petrone
Title: Assistant Treasurer
-9-
<PAGE>
Exhibit 4(t)
<PAGE>
AMENDMENT TERMINATING INTERCREDITOR AGREEMENT
This Amendment Terminating Intercreditor Agreement, dated as of
February 28, 1994 (the "Amendment"), made by and among CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY ("CIBC"), NATIONAL AUSTRALIA BANK LIMITED, NEW YORK
BRANCH ("NAB"), THE FUJI BANK, LIMITED, NEW YORK BRANCH ("Fuji") (CIBC, NAB and
Fuji, collectively, the "Banks"), CIBC, as agent for the Banks (the "Agent"),
CANADIAN IMPERIAL BANK OF COMMERCE (the "Swap Party"), CRI FUNDING CORPORATION,
NOMURA ASSET CAPITAL CORPORATION, NOMURA SECURITIES INTERNATIONAL, SIGNET
BANK/VIRGINIA, SIGNET BANK/VIRGINIA, as Agent, WESTPAC BANKING CORPORATION, NEW
YORK BRANCH ("WESTPAC"), by ASLK-CGER BANK, GRAND CAYMAN BRANCH, its Assignee,
and CRIIMI MAE INC. (formerly CRI Insured Mortgage Association, Inc. ("CRIIMI
MAE").
WHEREAS, certain of the parties have heretofore
<PAGE>
entered into that certain Intercreditor Agreement dated as of December 31, 1991
(the "1991 Intercreditor Agreement"); WHEREAS, certain of the parties have
heretofore entered into that certain Intercreditor Agreement dated as of April
30, 1993 (the "1993 Intercreditor Agreement"), which purported to supersede the
1991 Intercreditor Agreement, but did not include all of the signatories
thereto;
WHEREAS, WESTPAC terminated its status as a creditor of CRIIMI MAE
under the commercial paper facility on April 30, 1993, and subsequently assigned
all of its rights as a creditor under the term loan facility to ASLK-CGER BANK,
GRAND CAYMAN BRANCH pursuant to an Assignment and Assumption Agreement dated
September 17, 1993;
WHEREAS, the above-named parties are the only parties to the 1991
Intercreditor Agreement and the 1993 Intercreditor Agreement (collectively, the
"Intercreditor Agreements"), there being no Additional Party (as defined in the
Intercreditor Agreements); and
WHEREAS, above-named parties now desire to terminate the Intercreditor
Agreements.
NOW THEREFORE, the parties hereto, being all the parties to the
Intercreditor Agreements, in consideration of the premises and valuable
consideration, hereby agree as follows:
1. The Intercreditor Agreements shall be and are hereby terminated
in their entirety.
2. The parties, in consideration of their mutual releases, hereby
mutually discharge, remise and release each other, their successors, directors,
officers, employees, agents or assigns from any claim or obligation of
whatsoever nature, which any of
<PAGE>
the parties now have or may have in the future, against each other, their
successors, directors, officers, employees, agents or assigns arising from or
relating to the Intercreditor Agreements and the termination thereof by this
Amendment.
3. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
4. COUNTERPARTS. This Agreement may be executed in counterparts by
the parties hereto, and each such counterpart shall be considered an original
and all such counterparts shall constitute one and the same instrument.
5. RECITALS. All of the recitals hereinabove set forth are
incorporated in this Amendment by reference.
6. ENTIRE AGREEMENT. This Amendment sets forth the entire agreement
between the parties with respect to the subject matter hereof, and this
Amendment supersedes and replaces any agreement or understanding that may have
existed between the parties prior to the date hereof.
7. EXECUTION. Each of the parties hereto represents that it is
authorized to execute and deliver this Amendment.
[THIS SPACE INTENTIONALLY LEFT BANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment, all as of the day and year first above mentioned.
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY,
as a Bank and as the Agent
By: /s/ Daniel J. Conlon
--------------------------------
Title: Vice President
-----------------------------
425 Lexington Avenue
New York, New York 10017
Attn: Ms. Arlene Tellerman
Tel: (212) 856-3763
Fax: (212) 856-3695
NATIONAL AUSTRALIA BANK LIMITED,
NEW YORK BRANCH
By: /s/ Thomas Kilfoyle
--------------------------------
Title: Assistant Vice President
-----------------------------
200 Park Avenue - 34th Floor
New York, New York 10166
Attn: Mr. Thomas Kilfoyle
Tel: (212) 916-9510
Fax: (212) 983-1969
<PAGE>
WESTPAC BANKING CORPORATION,
NEW YORK BRANCH
By Its Assignee under an Assignment
and Assumption Agreement dated
September 17, 1993
ASLK-CGER BANK, GRAND CAYMAN BRANCH
By: /s/ John Mead Jr
--------------------------------
Title: Vice President
-----------------------------
c/o New York Branch
10 East 50th Street
New York, New York 10022
Attn: John J.S. Mead, Jr.
Tel: (212) 421-4900
Fax: (212) 421-0133
THE FUJI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ Michael Gebauer
--------------------------------
Title: Vice President and Manager
-----------------------------
Two World Trade Center
New York, New York 10048
Attn: Mr. Michael P. Gebauer
Tel: (212) 898-2064
Fax: (212) 321-9407
<PAGE>
CANADIAN IMPERIAL BANK OF COMMERCE,
as Swap Party
By: /s/ Daniel J. Conlon
--------------------------------
Title: Vice President
-----------------------------
425 Lexington Avenue
New York, New York 10017
Attn: Ms. Marlene Alonzo
Tel: (212) 856-6513
Fax: (212) 856-6518
NOMURA ASSET CAPITAL CORPORATION
By: /s/ John C. Howe
--------------------------------
Title: Managing Director
-----------------------------
2 World Financial Center
Building B, 21st Floor
New York, New York 10281-1198
Attn: Mr. Vincent Moore
Tel: (212) 667-2250
Fax: (212) 667-1014
<PAGE>
NOMURA SECURITIES INTERNATIONAL
By: /s/ John C. Howe
--------------------------------
Title: Managing Director
-----------------------------
2 World Financial Center
Building B, 21st Floor
New York, New York 10281-1198
Attn: Mr. Vincent Moore
Tel: (212) 667-2250
Fax: (212) 667-1014
CRIIMI MAE INC.
By: /s/ H. William Willoughby
--------------------------------
Title: President
-----------------------------
The CRI Building
11200 Rockville Pike
Rockville, Maryland 20852
Attn: Mr. William B. Dockser
Mr. Jay R. Cohen
Office of General Counsel
Tel: (301) 468-9200
Fax: (301) 231-0396
<PAGE>
SIGNET BANK/VIRGINIA
By: /s/ Barry Cooper
--------------------------------
Title: Vice President
-----------------------------
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Attn: Barry E. Cooper
David H. Olson
Tel: (301) 961-0067
Fax: (301) 652-1174
SIGNET BANK/VIRGINIA,
as agent
By: /s/ Barry Cooper
--------------------------------
Title: Vice President
-----------------------------
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Attn: Barry E. Cooper
David H. Olson
Tel: (301) 961-0067
Fax: (301) 652-1174
<PAGE>
CRI FUNDING CORPORATION
By: /s/ Gary Carlin
--------------------------------
Title: Vice President
-----------------------------
c/o Merrill Lynch & Co.
World Financial Center
South Tower
225 Liberty Street - 8th Floor
New York, New York 10080-6108
Attn: Mr. Gary Carlin
Tel: (212) 236-7200
Fax: (212) 236-7584
<PAGE>
Exhibit 4(u)
<PAGE>
NOMURA
NOMURA SECURITIES INTERNATIONAL, INC.
2 World Financial Center, Building B
New York, New York 10281-1198
Telephone
(212) 667-9300
Telex
(International)
2223/1
December 12, 1994
Mr. Jay Cohen
CRIIMI Mae, Inc.
The CRI Building
11200 Rockville Pike
Rockville, MD 20852
Dear Mr. Cohen:
Reference is made to (i) the Committed Master Repurchase Agreement dated as
of April 30, 1993 by and among Nomura Securities International, Inc. ("NSI") and
CRI Insured Mortgage Association, Inc. (now known as CRIIMI MAE, INC.) the
"April NSI Repurchase Agreement"); (ii) the Commitment Master Repurchase
Agreement Governing Purchases And Sales of Participation Certificates dated as
of April 30, 1993 by and among Nomura Asset Capital Corporation ("NACC" and
together with NSI, "Nomura") and CRI Insured Mortgage Association, Inc. (now
known as CRIIMI MAE, INC.) (the "April NACC Repurchase Agreement" and together
with the April NSI Repurchase Agreement, the "April Repurchase Agreements");
(iii) the Committed Master Repurchase Agreement dated as of November 30, 1993 by
and among NSI and CRIIMI MAE INC. ("Criimi Mae") (the October NSI Repurchase
Agreement"); and (iv) the Commitment Master Repurchase Agreement Governing
Purchases And Sales of Participation Certificates dated as of November 30, 1993
by and among NACC and Criimi Mae (the "October NACC Repurchase Agreement" and
together with the October NSI Repurchase Agreement, the "October Repurchase
Agreements" and together with the April Repurchase Agreements, the "Repurchase
Agreements"). Terms not otherwise defined herein shall have the meanings set
forth in the Repurchase Agreements.
Criimi Mae has requested that Nomura amend the Repurchase Agreements to
provide Criimi Mae certain relief as set forth in Cynthia Azzara's letter to
William Rooney dated November 28, 1994. Upon the satisfaction of certain
conditions as set forth herein, Nomura will consent to the following amendment
to the Repurchase Agreements:
1. Section 10(b)(v) of each of the Repurchase Agreements shall be deleted in
its entirety and replaced with the following:
"UNENCUMBERED ASSETS. Seller shall maintain cash, cash equivalents
(including lines of credit deemed satisfactory in the sole judgment of
Buyer) and other assets (including the unencumbered common stock of CRI
Liquidating REIT, Inc. owned and held by Seller but excluding any hedge
<PAGE>
contracts owned by Seller) deemed satisfactory in the sole judgment of
Buyer (the loan value of which shall be determined in the sole judgment of
Buyer) equal to at least 2% of the total indebtedness of the Seller."
2. Section 13(a)(xiv) of each of the Repurchase Agreements shall be deleted in
its entirety and replaced with the following:
"Subject to Section 13(a)(xv), Seller's ratio of consolidated total
liabilities (excluding payables in the normal course of business) to
consolidated shareholders equity (both computed in accordance with GAAP)
exceeds 3.0 to 1 (the "GAAP Ratio"); or such leverage ratio, as
recalculated by Buyer by subtracting or adding unrealized losses or gains
as determined in accordance with SFAS 115 and by adding or subtracting
unrealized gains or losses from any hedge contracts owned by Seller,
exceeds the calculated GAAP Ratio by a factor of 1, provided that such
recalculation is compared to the GAAP Ratio as calculated as of the
previous quarter end."
3. Section 13(a)(xv) of each of the Repurchase Agreements shall be deleted in
its entirety and replaced with the following:
"Seller pledges, directly or indirectly, hypothecates or encumbers any of
its assets or engages in repurchase transactions or similar transactions
with any of its assets (excluding (i) assets already pledged under existing
facilities, (ii) any assets required to be pledged for purposes of
collateral maintenance under such facilities and (iii) subordinated debt
securities subject to master repurchase agreements with financial
institutions, provided that the aggregate indebtedness pursuant to such
repurchase agreements shall not exceed $50,000,000, and provided that the
pledge of any other assets of Seller pursuant to such repurchase agreements
shall not cause an Event of Default hereunder, and provided further that
any equity that the Seller retains in any such repurchase transaction shall
not be included in the calculations set forth in Section 13(a)(xiv) above)
before notification to and written approval by Buyer, which approval shall
not be unreasonably withheld."
4. Each of the April NACC Repurchase Agreement and the October NACC Repurchase
Agreement shall be amended by adding the following new Section 12(g):
"Seller shall use its best efforts to assist Buyer in causing the
registration of each Purchased PC purchased by Buyer and pledged by Seller
under this Agreement in the name of Nomura Asset Capital Corporation. So
long as no Event of Default has occurred or is continuing hereunder, Buyer
shall instruct each servicer (i) that Seller shall retain all servicing-
related authority and (ii) to remit payments of principal and interest to
Seller at the account so directed by Seller. Actual costs associated with
the registration of the Purchased PC's shall be borne by Buyer, provided
that Seller shall be responsible for any legal costs incurred by it in
connection therewith. If Seller fails to use its best efforts and the
Purchased PC's are not registered in the name of Nomura Asset Capital
Corporation prior to December 21, 1994, an Event of Default shall be deemed
to have occurred under the Repurchase Agreements."
5. Except as amended herein, all other terms and conditions of the Repurchase
Agreements shall remain in full force and effect.
As a condition precedent to Nomura consenting to the amendments set forth
above, Criimi Mae shall execute the Master Collateral Security and Netting
Agreement sent to you herewith. Upon the due
<PAGE>
and valid execution of such agreement and this letter agreement by the parties
hereto, the amendments set forth herein shall be in full force and effect.
Please indicate Criimi Mae's acceptance of the amendments and conditions
described herein by causing a duly authorized officer to execute at the place
indicated below.
Sincerely,
Nomura Securities International, Inc.
Nomura Asset Capital Corporation
By: /s/ John C. Howe
---------------------------------
Managing Director
AGREED AND ACCEPTED:
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
---------------------------------
Executive Vice President
<PAGE>
Exhibit 4(v)
<PAGE>
MASTER COLLATERAL SECURITY AND NETTING AGREEMENT
MASTER COLLATERAL SECURITY AND NETTING AGREEMENT, dated as of December
12, 1994, between Nomura Securities International, Inc. ("NSI") and Nomura Asset
Capital Corporation (individually an "NSI Company" and collectively "NSI
Companies") on the one hand, and CRIIMI MAE Inc. (formerly known as CRI Mortgage
Insured Association, Inc.) (together, "Counterparty"), on the other hand. All of
the NSI Companies together are also referred to herein as the "NSI Group".
WHEREAS, in order to induce each NSI Company and Counterparty to enter
into future transactions and agreements and maintain existing transactions and
agreements with each other including, without limitation, extensions of credit,
purchases and sales of securities and whole loans, repurchase and reverse
repurchase transactions of securities and whole loans, securities loans and
borrows, dollar rolls, interest rate and currency exchange transactions
(including, but not limited to, swaps, caps and floors), futures and options on
futures transactions, secured loan transactions, certificates of deposit,
underwriting agreements and agreements for advisory services (collectively
"Transactions"), Counterparty and each NSI Company desire to enter into this
Master Collateral Security and Netting Agreement.
NOW, THEREFORE, Counterparty and each NSI Company agree as follows:
1. Counterparty hereby grants to each member of the NSI Group a
continuing security interest in and first lien on
<PAGE>
all of its respective securities, notes, mortgages, instruments, financial
assets, monies or other property and all distributions thereon and proceeds
thereof, whenever the same is held or carried by or for such member by a member
of the NSI Group or any of such member's agents (collectively the "Collateral")
or pledged, lent or sold in a Transaction by Counterparty to any member of the
NSI Group. The Collateral secures the payment and performance of any and all
obligations and liabilities of Counterparty to each member of the NSI Group now
or hereafter existing (including without limitation obligations and liabilities
under Transactions) whether matured, unmatured, liquidated, unliquidated, fixed
or contingent (together with interest at the rate provided under any agreement
evidencing the same (or if not so provided at a commercially reasonable rate)
collectively the "Secured Obligations").
2. In the event (collectively an "Event of Default")
(i) Counterparty (or any receiver, trustee, conservator,
liquidator, legal custodian or similar official appointed for such party or any
of its property) defaults under, or breaches, disaffirms or repudiates, any
agreement or any Transaction with a member of the NSI Group;
(ii) Counterparty becomes insolvent or a debtor under any
bankruptcy, reorganization or similar law or regulations; or
(iii) a receiver, trustee, conservator, liquidator, legal
custodian or similar official is appointed for Counterparty or any of its
property
<PAGE>
then each member of the NSI Group shall have, in addition to the rights and
remedies of a secured creditor under the New York Uniform Commercial Code then
in effect and such other rights and remedies as may be provided by law,
regulation or agreement (in all cases without notice to Counterparty) to
(i) accelerate the maturity of any obligation or liability of
Counterparty in connection with any such Transaction and to immediately cancel,
liquidate or terminate any Transaction and any related agreement between any
such member and any member of the NSI Group,
(ii) sell, at private or public sale, any Collateral and to apply
the proceeds thereof against any Secured Obligations of Counterparty, or retain
and apply any Collateral in satisfaction of any such Secured Obligations, and
(iii) offset, net and recoup (a) securities, notes, mortgages,
monies, or other property due from any member of Counterparty to any member of
the NSI Group, (b) any claims by Counterparty against any member of the NSI
Group and any obligations or liabilities of any member of the NSI Group to
Counterparty, or (c) any obligations or liabilities of Counterparty to any
member of the NSI Group (including, without limitation, in connection with
Transactions) against any Secured Obligation of Counterparty.
3. Each of the parties hereto acknowledge that (i) the parties have
or may have entered into and may continue to enter into many repurchase and
reverse repurchase transactions, securities loans and borrow, dollar rolls and
purchase and sales of U.S.
<PAGE>
government or agency securities and whole loans "Capital Markets Transactions")
which have identical termination, repurchase, maturity or settlement dates or
have been and will be effected on an open or overnight basis and (ii) all
Capital Markets. Transactions have been and will be entered into, among other
things, in consideration of each other. In this regard, with respect to Capital
Markets Transactions having identical maturity, termination, repurchase and
settlement dates or effected on an open or overnight basis, at such times as the
parties may mutually agree upon, any member of the NSI Group may aggregate,
set-off and net any Collateral, or the value thereof, required to be delivered
by Counterparty on the relevant maturity, termination, repurchase and settlement
date or date upon which any Capital Markets Transaction effected on an overnight
basis or open basis is settled or terminated, as the case may be. Thereupon, the
only delivery obligation of any of the parties in connection with such Capital
Markets Transactions will be for the parties to deliver such Collateral or a net
cash payment, as the case may be, as may be required after giving effect to such
aggregation, netting and set-off. The method by which the parties hereto will
value such Collateral for such netting and set-off purposes will be determined
by the NSI Companies in the commercially reasonable exercise of their
discretion. It is further agreed that with respect to Capital Markets
Transactions having identical maturity, termination, settlement and repurchase
dates or effected on an open or overnight basis, any member of the NSI Group
may, at such times as the parties may mutually agree upon, aggregate,
<PAGE>
set-off and net cash required to be paid by any member of the NSI Group to
Counterparty in connection with any such Capital Markets Transaction, on such
maturity, termination, settlement or repurchase date, as the case may be, or, in
connection with Capital Markets Transactions effected on an overnight or open
basis, the date upon which any such Capital Markets Transaction is terminated or
settled. Thereupon, with the exception of amounts payable in connection with
defaults or events of default, the only payment obligation of the parties to
each other in connection with any such Capital Markets Transaction will be for
the parties to pay such amount as may be required after giving effect to such
aggregation, netting and set-off. Upon making such net payment and/or delivery,
as the case may be, and provided that the Collateral subject to such Capital
Markets Transaction has been returned properly to the appropriate party
respectively and that all other obligations of the parties hereto have been
satisfied, each of the parties agrees to reflect on its books and records that
such netted Capital Markets transactions have been discharged fully.
4. THIS COLLATERAL SECURITY AND NETTING AGREEMENT AND EACH AND EVERY
OTHER AGREEMENT AND TRANSACTION BETWEEN THE PARTIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND IN THE EVENT
THAT ANY LAWSUIT IS COMMENCED RELATING TO THIS COLLATERAL SECURITY AND NETTING
AGREEMENT OR ANY OTHER AGREEMENT OR TRANSACTION THE PARTIES AGREE TO SUBMIT TO
THE JURISDICTION OF THE FEDERAL AND STATE COURTS SITUATED IN THE COUNTY OF NEW
YORK IN THE STATE OF NEW YORK IN
<PAGE>
CONNECTION WITH ANY SUCH DISPUTE.
5. The rights and remedies granted hereby to the parties are in
addition to any rights and remedies, and supersede any limitations on such
rights and remedies that are inconsistent herewith, that they may have under any
existing or future agreements with the other party unless, in the case of any
future agreements, any inconsistent provision therein is stated explicitly to
supersede this Master Collateral Security and Netting Agreement. Without
limiting the generality of the foregoing, nothing herein shall be construed as a
requirement that a party cause Collateral held on account of a particular
Transaction to be attributed (in whole or in part) to any other Transaction in
determining whether that party is entitled to make a demand or call upon the
other party for additional securities, monies or other property under any such
other Transaction.
6. This Master Collateral Security and Netting Agreement may not be
amended or modified except in a written instrument executed by NSI and
Counterparty. The rights and obligations of the parties under this Master
Collateral Security and Netting Agreement and under any transaction or agreement
(including any Transaction between the parties) may not be assigned without the
prior written consent of the other party and any purported assignment without
such consent shall be null and void. Subject to the foregoing, this Master
Collateral Security and Netting Agreement shall be binding on the parties and
their successors and assigns.
7. Each party represents and warrants to the other
<PAGE>
party that it has all requisite power to execute, deliver and perform its
obligations under this Master Collateral Security and Netting Agreement; that
this Master Collateral Security and Netting Agreement constitutes a legal, valid
and binding agreement enforceable in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights generally and
subject, as to enforceability, to general principals of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law); that neither
the execution and delivery of this Master Collateral and Security Agreement by
the party, nor the performance of its obligations hereunder, (A) conflicts or
will conflict with, results or will result in a breach or violation of, or
constitutes or will constitute a default under (i) its Articles of Incorporation
or By-laws, (ii) the terms of any agreement, obligation or instrument to which
it is a party or (iii) any statute, law, decree, order, rule or regulation
applicable to it, or (B) requires any authorization, approval, consent, order,
filing or other action except such as has previously been obtained.
IN WITNESS WHEREOF, the undersigned have executed this Master
Collateral Security and Netting Agreement as of the 12th day of December, 1994.
NOMURA SECURITIES INTERNATIONAL, INC.
<PAGE>
By: /s/ John C. Howe
-----------------------------------
Title: Managing Director
--------------------------------
NOMURA ASSET CAPITAL CORPORATION
By: /s/ John C. Howe
-----------------------------------
Title: Managing Director
--------------------------------
AGREED AND ACCEPTED
CRIIMI MAE INC.
By: /s/ Cynthia O. Azzara
-----------------------------------
Title: Chief Financial Officer
--------------------------------
<PAGE>
Exhibit 4(w)
<PAGE>
NOMURA
NOMURA HOLDING AMERICA, INC.
2 World Financial Center, Building B
New York, N.Y. 10281-1198
December 20, 1994
Mr. Jay Cohen
CRIIMI MAE Inc.
The CRI Building
11200 Rockville Pike
Rockville, MD 20852
Re: Letter Agreement by and among Nomura Securities International, Inc., Nomura
Asset Capital Corporation, and CRIIMI MAE Inc. dated as of December 12,
1994
Dear Mr. Cohen:
Pursuant to our conversation on December 19, 1994, you have requested Nomura
Securities International, Inc. (NSI) and Nomura Asset Capital Corporation (NACC)
to consent to CRIIMI MAE's execution of the $10,000,000.00 line of credit with
Riggs National Bank (as described in the enclosed term sheet dated December 15,
1994).
Based on the terms and conditions within the term sheet and your stated
intention to use funds from the working capital line only on a short term basis
(not for long-term investments), NSI and NACC hereby consent to CRIIMI MAE's
execution of and borrowings from this line of credit. NSI and NACC will review
the use of this line of credit on a quarterly basis to ensure the aforementioned
conditions have been adhered to. We reserve the right to withdraw our consent
if after our review we find that these conditions have not been met. We also
agree to grant CRIIMI MAE a 30 day grace period to terminate the line of credit
with Riggs in the event we withdraw our consent.
Please do not hesitate to call me if you have any questions.
Sincerely,
/s/ William T. Rooney
William T. Rooney
Nomura Securities International, Inc.
Nomura Asset Capital Corporation
<PAGE>
Exhibit 4(x)
<PAGE>
AMENDMENT
This amendment is dated as January 19, 1995. Reference is made to (i)
the Commitment Letter dated as of April 30, 1993 (the "April Commitment Letter")
by and among Nomura Securities International, Inc. ("NSI"), Nomura Asset Capital
Corporation ("NACC") and CRI Insured Mortgage Association, Inc. (now known as
CRIIMI MAE INC.) ("Criimi Mae") and (ii) the Commitment Letter dated as of
October 27, 1993 (the "October Commitment Letter" and together with the April
Commitment Letter, the "Commitment Letters") by and among NSI, NACC, and Criimi
Mae and (iii) each of the Committed Master Repurchase Agreements subject to the
Commitment Letters. Terms not otherwise defined herein shall have the meanings
set forth in the Commitment Letters.
1. In order to provide for the immediate repurchase of the Purchased
PC's (as defined in the FHA Facilities) under the respective FHA Facilities, the
commitment of Criimi Mae to sell FHA Mortgage Loans to NACC and NACC's
commitment to Criimi Mae to purchase FHA Mortgage Loans shall cease upon the
repurchase thereof. Criimi Mae shall take all necessary action to promptly
repurchase the Purchased PC's for United States Dollars; provided, however, that
NACC shall have no obligation to release the Purchased PC's until all amounts
due under the FHA Facilities are received directly by NACC, and NACC determines
that no margin deficit exists under the Facilities. Thereafter, NACC shall
release the Purchased PC's with the assignment and assumption form completed by
the participant thereof with assignee in blank and all other related documents
thereto. If all amounts due NACC under the FHA Facilities are not paid in full
by January 24, 1995, an Event of Default shall be deemed to have occurred under
the FHA Facility, and NACC may exercise its rights under the Facility Agreements
without further notice to Criimi Mae.
2. The definition of "Minimum Balance" in the April Commitment
Letter shall be amended to mean the outstanding Repurchase Price of the
Purchased Securities (as defined in the GNMA Facility) on January 20, 1995. The
definition of "Minimum Balance" in the October Commitment Letter shall be
amended to mean the outstanding Repurchase Price of the Purchased Securities on
January 20, 1995.
3. With respect to this amendment only, NACC and NSI each agree to
waive any breakage fees it could have imposed for the early termination of the
FHA Facility.
4. With respect to Section 4(a) of each of Committed Master
Repurchase Agreements subject to the Commitment Letters, only securities
marginable in NSI shall be "reasonably acceptable" to Buyer thereunder.
5. Section 13(a)(xv) of each of the Committed Repurchase Agreements
shall be deleted in their entirety and replaced with
<PAGE>
the following:
"Seller pledges, directly or indirectly, hypothecates or encumbers any
of its assets or engages in repurchase transactions or similar transactions
with any of its assets (excluding (i) assets already pledged under existing
facilities, (ii) any assets required to be pledged for purposes of
collateral maintenance under such facilities, (iii) subordinated debt
securities subject to master repurchase agreements with financial
institutions, and (iv) Participation Certificates representing 100%
interests in FHA-insured Mortgage Loans purchased by German American
Capital Corporation, provided that the aggregate indebtedness pursuant to
(iii) above shall not exceed $50,000,000, and provided that the pledge of
any other assets of Seller pursuant to (iii) or (iv) above shall not cause
an Event of Default hereunder, and provided further that any equity that
the Seller retains in any transaction set forth in (iii) above shall not be
included in the calculations set forth in Section 13(a)(xiv) above), before
notification to and written approval by Buyer, which approval shall not be
unreasonably withheld."
6. As a condition precedent to the execution of the amendment,
Criimi Mae shall provide NACC a written commitment of a purchaser of the
Purchased PC's in form and substance acceptable to NACC, which commitment shall
provide for settlement of the FHA Mortgage Loans no later than January 24, 1995
in immediately available funds in an amount not less than the Repurchase Price
with respect to such Purchased PC's.
7. Except as amended herein, all other terms and conditions of the
Commitment Letters and the Facility Agreements shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties hereto execute this amendment to
the Commitment Letters.
CRIIMI MAE INC. NOMURA SECURITIES INTERNATIONAL,INC.
By: /s/ Jay R. Cohen By: /s/ William T. Rooney
-------------------------------- ----------------------------------
NOMURA ASSET CAPITAL CORPORATION
By: /s/ William T. Rooney
----------------------------------
<PAGE>
Exhibit 4(y)
<PAGE>
AMENDMENT
This amendment is dated as January 24, 1995. Reference is made to (i) the
Commitment Letter dated as of April 30, 1993 (the "April Commitment Letter") by
and among Nomura Securities International, Inc. ("NSI"), Nomura Asset Capital
Corporation ("NACC") and CRI Insured Mortgage Association, Inc. (now known as
CRIIMI MAE INC.) ("Criimi Mae"), as amended and (ii) the Commitment Letter dated
as of October 27, 1993 (the "October Commitment Letter" and together with the
April Commitment Letter, the "Commitment Letters") by and among NSI, NACC, and
Criimi Mae, as amended and (iii) each of the Committed Master Repurchase
Agreements subject to the Commitment Letters, as amended. Terms not otherwise
defined herein shall have the meanings set forth in the Commitment Letters.
1. Section 4(b) of each of Committed Master Repurchase Agreements subject to
the Commitment Letters are hereby deleted.
2. Section 13(a)(xv) of each of the Committed Repurchase Agreements shall be
deleted in their entirety and replaced with the following:
"Seller pledges, directly or indirectly, hypothecates or encumbers any of
its assets or engages in repurchase transactions or similar transactions
with any of its assets (excluding (i) assets already pledged under existing
facilities, (ii) any assets required to be pledged for purposes of
collateral maintenance under such facilities, (iii) subordinated debt
securities subject to master repurchase agreements with financial
institutions, and (iv) (A) Participation Certificates representing 100%
interests in FHA-insured Mortgage Loans formerly pledged to NACC and (B)
GNMA Securities formerly pledged to Canadian Imperial Bank of Commerce,
purchased by German American Capital Corporation (or one of its
affiliates), provided that the aggregate indebtedness pursuant to (iii)
above shall not exceed $50,000,000, and provided that the pledge of any
other assets of Seller pursuant to (iii) or (iv) above shall not cause an
Event of Default hereunder, and provided further that any equity that the
Seller retains in any transaction set forth in (iii) above shall not be
included in the calculations set forth in Section 13(a)(xiv) above), before
notification to and written approval by Buyer, which approval shall not be
unreasonably withheld."
3. Except as amended herein, all other terms and conditions of the Commitment
Letters and the Facility Agreements, including amendments thereto, shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto execute this amendment to the
Commitment Letters.
CRIIMI MAE Inc. Nomura Securities International, Inc.
By: /s/ Jay R. Cohen By: /s/ John C. Howe
--------------------------- ---------------------------------
Nomura Asset Capital Corporation
By: /s/ John C. Howe
-------------------------------------
<PAGE>
Exhibit 4(z)
<PAGE>
April 29, 1993
Signet Bank/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Westpac Banking Corporation
335 Madison Avenue
New York, New York 10017-4681
Re: First Amendment to Amended and Restated Credit
AGREEMENT
-------------------------------------
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 22, 1992 (the "Credit Agreement") among CRI Insured Mortgage
Association, Inc. (the "Borrower"), the Banks listed on the signature pages
thereto (the "Banks") and Signet Bank/Virginia, as Agent (the "Agent"). Except
as otherwise provided, capitalized terms used herein and not defined shall have
the meanings set forth in the Credit Agreement.
The Borrower has requested that the Credit Agreement be amended as
hereinafter provided to permit the Borrower to incur certain Debt under credit
facilities from Nomura Securities International Inc. and Nomura Asset Capital
Corporation on substantially the terms and conditions specified in a letter
dated March 3, 1993 from the Borrower to the Agent, a copy of which is attached
as Exhibit A hereto (collectively, the "Nomura Credit Facilities"). The Banks
and the Agent are pleased to confirm their agreement to such request, subject to
the terms and conditions contained herein.
Accordingly, upon the acceptance of this First Amendment by the Banks and
the Agent in the space provided for that purpose below, the parties hereto agree
as follows:
1. AMENDMENT TO THE CREDIT AGREEMENT. Subsection 5.05(c) of the Credit
Agreement is hereby amended in its entirety to read as follows:
(c) Debt of the Borrower under the Guaranty dated November 28, 1989
related to the Debt of CRI Funding Corporation under the CIBC Credit
Agreement and Debt of the Borrower under the Nomura Credit Facilities, as
defined in the First Amendment to Amended and Restated Credit Agreement
dated as of April 29, 1993 among the Borrower, the Banks and the Agent;
provided, that the aggregate amount of all such Debt permitted under this
subsection (c) shall at no time exceed $250,000,000;
<PAGE>
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The Borrower represents and warrants that, (i) all
representations and warranties made in or in connection with the Credit
Agreement, this First Amendment and each other Loan Document are true,
correct and complete on and as of the date hereof and (ii) no event which
would constitute a Default under the Credit Agreement, as amended hereby,
or any other Loan Document has occurred and is continuing.
(b) The Borrower shall deliver to each Bank true and correct copies
of all documents governing the Nomura Credit Facilities promptly upon their
execution and delivery by the Borrower.
3. CONDITIONS OF AMENDMENT. The agreement of the Banks and the Agent set
forth in Paragraph 1 of this First Amendment is subject to the satisfaction of
the following conditions precedent:
(a) The Banks and the Agent shall have received the following, all of
which must be satisfactory in form and substance to the Banks and the
Agent, in their discretion:
i. this First Amendment, duly executed by the Borrower, the
Banks and the Agent; and
ii. any additional agreements, opinions, certifications,
instruments and other documents relating hereto, to the
Nomura Credit Facilities or to the Credit Agreement that any
Bank or the Agent may reasonably deem necessary or
desirable.
(b) All representations and warranties made in or in connection with
the Credit Agreement, this First Amendment and each other Loan Document,
shall be true, correct and complete on and as of the date hereof.
(c) No Default shall have occurred and be continuing.
4. NO CLAIMS OR DEFENSES. The Borrower acknowledges and agrees that its
obligations under the Loan Documents are its valid obligations and, as of the
date hereof, there are no claims, setoffs or defenses to the payment or
performance by the Borrower of such obligations, and that the Banks and the
Agent may enforce the payment and performance of such obligations as set forth
in the Loan Documents.
5. COUNTERPART EXECUTION. This First Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
<PAGE>
6. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF.
4. REFERENCES TO CREDIT AGREEMENT. Except as herein specifically
amended, the Credit Agreement shall remain in full force and effect in
accordance with its terms. Whenever reference is made in any note, document,
letter or conversation, such reference shall, without more, be deemed to refer
to the Credit Agreement, as amended hereby.
CRI INSURED MORTGAGE ASSOCIATION, INC.
By: /s/ William B. Dockser
------------------------------
Title: Chairman of the Board
---------------------------
Accepted and Agreed to:
SIGNET BANK/VIRGINIA
By: /s/ Daniel H. Olson
------------------------------
Title: Vice President
---------------------------
WESTPAC BANKING CORPORATION
By: /s/ Ann Sadler
------------------------------
Title: Vice President
---------------------------
SIGNET BANK/VIRGINIA, as Agent
By: /s/ Daniel H. Olson
------------------------------
Title: Vice President
---------------------------
<PAGE>
Exhibit 4(aa)
<PAGE>
Signet Bank/Virginia
Westpac Banking Corporation
June 30, 1993
Page 2
June 30, 1993
Signet Bank/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Page 2
Westpac Banking Corporation
335 Madison Avenue
New York, New York 10017-4681
Re: Second Amendment to Amended and Restated Credit
Agreement
-----------------------------------------------
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 22, 1992 among CRI Insured Mortgage Association, Inc. (the "Borrower"),
the Banks listed on the signature pages thereto (the "Banks") and Signet
Bank/Virginia, as Agent (the "Agent"), as amended by the First Amendment thereto
dated April 29, 1993 (the "Credit Agreement"). Except as otherwise provided,
capitalized terms used herein and not defined shall have the meanings set forth
in the Credit Agreement.
The Borrower has requested that the Credit Agreement be amended as
hereinafter provided to permit the Borrower to incur certain Debt under credit
facilities from Nomura Securities International Inc. and Nomura Asset Capital
Corporation on substantially the terms and conditions specified in letters dated
March 3, April 15 and May 11, 1993 from the Borrower to the Agent, copies of
which are attached as Exhibit A hereto (collectively, the "Nomura Credit
Facilities"). The Borrower has also requested that the Banks consent to the
reincorporation of the Borrower and the Liquidating REIT under the laws of the
State of Maryland. The Banks and the Agent are willing to agree to such
requests, subject to the terms and conditions contained herein.
Accordingly, upon the acceptance of this Second Amendment by the Banks and
the Agent in the space provided for that purpose below, the parties hereto agree
as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Subsection 5.05(c) of the Credit Agreement is hereby amended
in its entirety to read as follows:
<PAGE>
Signet Bank/Virginia
Westpac Banking Corporation
June 30, 1993
Page 3
(c) Debt of the Borrower under the Guaranty dated
November 28, 1989 related to the Debt of CRI Funding
Corporation under the CIBC Credit Agreement and Debt of the
Borrower under the Nomura Credit Facilities, as defined in
the Second Amendment to Amended and Restated Credit
Agreement dated as of June 30, 1993 among the Borrower, the
Banks and the Agent; provided, that the aggregate amount of
all such Debt permitted under this subsection (c) shall at
no time exceed $350,000,000;
(b) Subsection 9.06(c) of the Credit Agreement is hereby amended
to delete the proviso at the end of the second sentence thereof.
2. CONSENT TO REINCORPORATION. Each Bank and the Agent hereby consent to
the reincorporation of the Borrower and the Liquidating REIT under the laws of
the State of Maryland on the terms and in the manner described in the excerpts
from the proxy statements, each dated April 6, 1993 of the Borrower and the
Liquidating REIT attached hereto as Exhibit B and C, respectively (the
"Reincorporations"). The Reincorporations are to be effected through a merger
of the Borrower into CRIIMI MAE Inc., a Maryland Corporation (the "Successor
Borrower") and a merger of the Liquidating REIT into CRI Liquidating Maryland
REIT, Inc., a Maryland Corporation (the "Successor Liquidating REIT").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The Borrower and the Successor Borrower represent and
warrant that (i) all representations and warranties made in or in
connection with the Credit Agreement, this Second Amendment and each
other Loan Document are true, correct and complete on and as of the
date hereof and (ii) no event which would constitute a Default under
the Credit Agreement, as amended hereby, or any other Loan Document
has occurred and is continuing.
(b) Immediately following the effective time of the
Reincorporations, the Successor Borrower shall be deemed to represent
and warrant that (i) all representations and warranties made in or in
connection with the Credit Agreement, as amended hereby, this Second
Amendment and each other Loan Document with respect to the Borrower
are true, correct and complete
<PAGE>
Signet Bank/Virginia
Westpac Banking Corporation
June 30, 1993
Page 4
on and as of such date with respect to the Successor Borrower after
giving effect to the Reincorporation and (ii) no event which would
constitute a Default under the Credit Agreement, as amended hereby, or
any other Loan Document has occurred and is continuing as of such date
after giving effect to the Reincorporation.
(c) The Borrower or the Successor Borrower shall deliver to each
Bank true and correct copies of (i) all documents governing the Nomura
Credit Facilities promptly upon their execution and delivery by the
Borrower and (ii) copies of the Certificates of Merger confirming the
effectiveness of the Reincorporations, certified as of a recent date
by the Secretary of State of the jurisdictions of the incorporations
of the Successor Borrower and the Successor Liquidating REIT promptly
after the effective time of the Reincorporations.
4. CONDITIONS OF AMENDMENT. The agreements of the Banks and the Agent
set forth in Sections 1 and 2 of this Second Amendment are subject to the
satisfaction of the following conditions precedent:
(a) The Banks and the Agent shall have received the following, all of
which must be satisfactory in form and substance to the Banks and the
Agent, in their discretion:
i. this Second Amendment, duly executed by the Borrower, the
Successor Borrower, the Banks and the Agent;
ii. (A) the articles of incorporation of the Successor Borrower
and the Successor Liquidating REIT as in effect upon the
consummation of the Reincorporations, certified as of a
recent date by the Secretary of State of the jurisdictions
of their respective incorporations, (B) the bylaws of the
Successor Borrower and the Successor Liquidating REIT as in
effect immediately following the consummation of the
Reincorporations, certified as of a recent date by their
respective corporate secretaries, (C) copies of the Merger
Agreements, Certificates of Merger and resolutions of the
boards of directors of the Borrower, the Successor Borrower,
the Liquidating REIT
<PAGE>
Signet Bank/Virginia
Westpac Banking Corporation
June 30, 1993k/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Page 5
and the Successor Liquidating REIT relating to the
Reincorporations, certified as of a recent date by the
corporate secretaries of the Borrower, the Successor
Borrower, the Liquidating REIT and the Successor Liquidating
REIT, as appropriate, and (D) certificates of good standing
of the Successor Borrower and the Successor Liquidating REIT
issued as of a recent date by the Secretary of State of the
jurisdictions of their respective incorporations;
iii. amendments to financing statements (Forms UCC-3 or the
appropriate equivalent) for filing to reflect the
Reincorporations; and
iv. any additional agreements, opinions, certifications,
instruments and other documents relating hereto, to the
Nomura Credit Facilities, to the Reincorporations or to the
Credit Agreement that any Bank or the Agent may reasonably
deem necessary or desirable.
(b) All representations and warranties made in or in connection with
the Credit Agreement, as amended hereby, this Second Amendment and each
other Loan Document, shall be true, correct and complete on and as of the
date hereof.
(c) No Default shall have occurred and be continuing.
5. EVENTS OF DEFAULT. In addition to the Events of Default contained in
the Loan Documents, it shall be an Event of Default under the Loan Documents if
one or more of the following events shall have occurred and be continuing:
(a) the Borrower or the Successor Borrower shall fail to observe or
perform any covenant contained herein for 30 days after written notice
thereof has been given to the Borrower or the Successor Borrower by the
Agent at the request of any Bank; or
(b) any representation, warranty, certification or statement made by
the Borrower or the Successor Borrower herein or in any certificate,
financial statement or other document delivered pursuant hereto shall prove
to have been incorrect in any material respect when made (or deemed made).
<PAGE>
Signet Bank/Virginia
Westpac Banking Corporation
June 30, 1993
Page 6
6. NO CLAIMS OR DEFENSES. The Borrower acknowledges and agrees that its
obligations under the Loan Documents are its valid obligations and, as of the
date hereof, there are no claims, setoffs or defenses to the payment or
performance by the Borrower of such obligations, and that the Banks and the
Agent may enforce the payment and performance of such obligations as set forth
in the Loan Documents.
7. ASSUMPTION; REFERENCES IN LOAN DOCUMENTS. Immediately upon the
effectiveness of the Reincorporation, the Successor Borrower hereby assumes all
of the obligations of the Borrower under the Loan Documents and adopts the
signature of the Borrower thereon as the Successor Borrower's signature and
acknowledges and agrees that such obligations are its valid obligations and, as
of the date hereof, there are no claims, setoffs or defenses to the payment or
performance by the Successor Borrower of such obligations, and that the Banks
and the Agent may enforce the payment and performance of such obligations
against the Successor Borrower as set forth in the Loan Documents. From and
after the effectiveness of this Second Amendment, all references in the Loan
Documents to the Borrower shall be deemed to refer to the Successor Borrower and
all references in the Loan Documents to the Liquidating REIT shall be deemed to
refer to the Successor Liquidating REIT.
8. AMENDMENTS AND WAIVERS. Any provision of this Second Amendment may be
amended or waived if, but only if, such amendment or waiver is in writing and is
signed by the Borrower (if still in existence), the Successor Borrower and the
Banks (and, if the rights or duties of the Agent are affected thereby, by the
Agent).
9. COUNTERPART EXECUTION. This Second Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
10. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF.
11. EFFECTIVENESS OF LOAN DOCUMENTS. Except as specifically amended in
this Second Amendment, the Loan Documents shall remain in full force and effect
in accordance with their respective terms. Whenever reference is made in any
note,
<PAGE>
Signet Bank/Virginia
Westpac Banking Corporation
June 30, 1993Signet Bank/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Page 7
document, letter or conversation, such reference shall, without more, be deemed
to refer to the Loan Documents as amended hereby.
CRI INSURED MORTGAGE ASSOCIATION, INC.
By: /s/ Jay R. Cohen
------------------------------
Title: Executive Vice President
---------------------------
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
------------------------------
Title: Executive Vice President
---------------------------
Accepted and Agreed to as of
the date first written above:
SIGNET BANK/VIRGINIA
By: /s/ David H. Olson
--------------------------------
David H. Olson
Vice President
WESTPAC BANKING CORPORATION
By: /s/ Anne D. Sadler
--------------------------------
Anne D. Sadler
Vice President
SIGNET BANK/VIRGINIA, as Agent
By: /s/ David H. Olson
--------------------------------
David H. Olson
Vice President
<PAGE>
Exhibit 4(bb)
<PAGE>
September 14, 1993
Signet Bank/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
Westpac Banking Corporation
335 Madison Avenue
New York, New York 10017-4681
Re: Third Amendment to Amended and Restated Credit Agreement
--------------------------------------------------------
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 22, 1992, as amended by the First Amendment thereto dated April 29,
1993 and the Second Amendment thereto dated June 30, 1993 (the "Credit
Agreement") among CRIIMI MAE Inc. (the "Borrower"), the Banks listed on the
signature pages thereto (the "Banks") and Signet Bank/Virginia, as Agent (the
"Agent"). Except as otherwise provided, capitalized terms used herein and not
defined shall have the meanings set forth in the Credit Agreement.
The Borrower has requested that the Credit Agreement be amended as
hereinafter provided to permit the Borrower to incur certain Debt under credit
facilities from Nomura Securities International Inc. and Nomura Asset Capital
Corporation on substantially the terms and conditions specified in letters dated
March 3, April 15 and May 11, 1993 from the Borrower to the Agent, copies of
which are attached as Exhibit A hereto (collectively, the "Nomura Credit
Facilities"). The Banks and the Agent are willing to agree to such requests,
subject to the terms and conditions contained herein.
Accordingly, upon the acceptance of this Third Amendment by the Banks and
the Agent in the space provided for that purpose below, the parties hereto agree
as follows:
1. AMENDMENTS TO THE CREDIT AGREEMENT. Subsection 5.05 of the Credit
Agreement is hereby amended in its entirety to read as follows:
SECTION 5.05 INCURRENCE OF DEBT.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, issue, assume, guarantee, incur or otherwise be or become
liable in respect of Debt, if, after the incurrence of such Debt, there
would exist the reasonable possibility of a material adverse effect on the
business financial position or results of operations of the Borrower and
its Subsidiaries, considered as a whole, or on
<PAGE>
the ability of the Borrower to perform its obligations under the Loan
Documents, other than:
(i) Debt of the Borrower to the Banks under the Loan Documents;
(ii) Debt of the Borrower under the Interest Rate Protection
Agreements;
(iii) (A) Debt of the Borrower under the Guaranty dated November
28, 1989 related to the Debt of CRI Funding Corporation under the CIBC
Credit Agreement, (B) Debt of the Borrower under the Nomura Credit
Facilities, as defined in the Third Amendment to Amended and Restated
Credit Agreement dated as of September 14, 1993 among the Borrower,
the Banks and the Agent and (C) other Debt of the Borrower on terms
and conditions similar to those applicable to the Debt described in
clauses (A) and (B) of this subsection; provided, that the aggregate
amount of all such Debt permitted under this subsection (a)(iii) shall
at no time exceed $490,000,000;
(iv) Debt of the Borrower in an amount not to exceed $20,000,000
incurred in connection with a working capital line of credit, which
shall not be required to be subordinated to Debt to the Banks under
the Loan Documents;
(v) Debt of the Borrower in an amount which does not exceed the
Consolidated Tangible Net Worth of the Borrower, subject to
restrictions reasonably satisfactory to the Banks that the holders of
any such Debt shall not exercise any right or remedy in connection
therewith before the date that is one year after the Termination Date;
(vi) accrued dividends not otherwise prohibited under the Loan
Documents;
(vii) accounts payable and accrued expenses incurred in the
ordinary course of business with maturities not exceeding one year;
and
(viii) other Debt expressly approved by the Required Banks,
which approval shall not be unreasonably withheld.
(b) Notwithstanding the foregoing or any other provision
contained herein, the Borrower will not permit the ratio of (i) Debt of
the Borrower and its Consolidated Subsidiaries, other than accounts payable
and accrued expenses incurred in the ordinary course of business with
maturities not exceeding one year, to (ii) consolidated
<PAGE>
stockholders' equity of the Borrower and its Consolidated Subsidiaries, to
exceed 2.5 to 1.
2. REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) The Borrower represents and warrants that, (i) all
representations and warranties made in or in connection with the Credit
Agreement, this Third Amendment and each other Loan Document are true,
correct and complete on and as of the date hereof and (ii) no event which
would constitute a Default under the Credit Agreement, as amended hereby,
or any other Loan Document has occurred and is continuing.
(b) The Borrower shall deliver to each Bank true and correct copies
of all documents governing the Nomura Credit Facilities promptly upon their
execution and delivery by the Borrower.
3. CONDITIONS OF AMENDMENT. The agreement of the Banks and the Agent set
forth in Paragraph 1 of this Third Amendment is subject to the satisfaction of
the following conditions precedent:
(a) The Banks and the Agent shall have received the following, all of
which must be satisfactory in form and substance to the Banks and the
Agent, in their discretion:
i. this Third Amendment, duly executed by the Borrower, the
Banks and the Agent; and
ii. any additional agreements, opinions, certifications,
instruments and other documents relating hereto, to the
Nomura Credit Facilities or to the Credit Agreement that any
Bank or the Agent may reasonably deem necessary or
desirable.
(b) All representations and warranties made in or in connection with
the Credit Agreement, this Third Amendment and each other Loan Document,
shall be true, correct and complete on and as of the date hereof.
(c) No Default shall have occurred and be continuing.
4. NO CLAIMS OR DEFENSES. The Borrower acknowledges and agrees that its
obligations under the Loan Documents are its valid obligations and, as of the
date hereof, there are no claims, setoffs or defenses to the payment or
performance by the Borrower of such obligations, and that the Banks and the
Agent may enforce the payment and performance of such obligations as set forth
in the Loan Documents.
5. COUNTERPART EXECUTION. This Third Amendment may be signed in any
number of counterparts, each of which shall be an
<PAGE>
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument.
6. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF.
4. REFERENCES TO CREDIT AGREEMENT. Except as herein specifically
amended, the Credit Agreement shall remain in full force and effect in
accordance with its terms. Whenever reference is made in any note, document,
letter or conversation, such reference shall, without more, be deemed to refer
to the Credit Agreement, as amended hereby.
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
------------------------------
Jay R. Cohen,
Executive Vice President
& Treasurer
Accepted and agreed to as of
the date first written above:
SIGNET BANK/VIRGINIA
By: /s/ David H. Olson
--------------------------------
David H. Olson, Vice President
WESTPAC BANKING CORPORATION
By: /s/ Anne D. Sadler
--------------------------------
Anne D. Sadler, Vice President
SIGNET BANK/VIRGINIA, as Agent
By: /s/ David H. Olson
--------------------------------
David H. Olson, Vice President
<PAGE>
Exhibit 4(cc)
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of September 17, 1993 among WESTPAC BANKING CORPORATION
(the "Assignor"), ASLK-CGER BANK, GRAND CAYMAN BRANCH (the "Assignee"), CRIIMI
MAE INC. (the "Borrower") and SIGNET BANK/VIRGINIA, as Agent (the "Agent").
W I T N E S S E T H:
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the Amended and Restated Credit Agreement dated as of December 22, 1992 among
the Borrower, the Assignor and the other Banks party thereto, as Banks, and the
Agent (as modified, amended or supplemented from time to time, the "Credit
Agreement"); and
WHEREAS, as provided under the Credit Agreement, the Assignor made A Loans
to the Borrower in an aggregate principal amount equal to $25,744,341.19 and B
Loans to the Borrower in an aggregate principal amount equal to $6,562,500; and
WHEREAS, the assignor has heretofore assigned to Signet Bank/Virginia
$4,000,000 of its A Loans and all of its B Loans; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of its remaining A Loans
in an amount equal to $21,744,341.19 (the "Assigned Amount"), and the Assignee
proposes to accept assignment of such rights and assume the corresponding
obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement and the
Pledge Agreement to the extent of the Assigned Amount, and the Assignee hereby
accepts such assignment from the Assignor and assumes all of the obligations of
the Assignor under the Credit Agreement and the Pledge Agreement to the extent
of the Assigned Amount, including the purchase from the Assignor of the
corresponding portion of the principal amount of the A Loans made by the
Assignor outstanding at the date hereof. Upon the execution and delivery hereof
by the Assignor, the Assignee, the Borrower and the Agent and the payment of the
amounts specified in Section 3 required to be paid on the date hereof (i) the
Assignee shall, as of the date hereof, succeed to the rights and be obligated to
perform the obligations of a Bank under the Credit Agreement and
<PAGE>
the Pledge Agreement and (ii) the Assignor shall, as of the date hereof, be
released from its obligations under the Credit Agreement and the Pledge
Agreement. The assignment provided for herein shall be without recourse to the
Assignor. To the extent that any provision of the Credit Agreement (such as
Section 7.06) measures the obligations of a Bank by reference to its Commitment,
the Assignee shall be deemed to have an A Loan Commitment of $35,631,630 and
Signet Bank/Virginia shall be deemed to have an A Loan Commitment of $49,368,370
and a B Loan Commitment of $15,000,000. Notwithstanding the foregoing, the
parties hereto acknowledge that the Banks' obligations to make Loans have
expired.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds an amount equal to $21,744,341.19. Notwithstanding
anything herein to the contrary, all interest accrued on the Assigned Amount to
the date hereof shall be for the account of the Assignor, and all interest
accruing from and after the date hereof shall be for the account of the
Assignee. Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the account of the
other party hereto, it shall receive the same for the account of such other
party to the extent of such other party's interest therein and shall promptly
pay the same to such other party.
SECTION 4. CONSENT OF THE BORROWER AND THE AGENT. This Agreement is
conditioned upon the consent of the Borrower and the Agent pursuant to Section
9.06(c) of the Credit Agreement. The execution of this Agreement by the
Borrower and the Agent is evidence of this consent. Pursuant to Section 9.06(c)
the Borrower agrees, upon surrender of the Assignor's Note, to execute and
deliver a Note payable to the order of the Assignee to evidence the assignment
and assumption provided for herein.
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of the Borrower, or the
validity and enforceability of the obligations of the Borrower in respect of the
Credit Agreement, the Pledge Agreement or any Note. The Assignee acknowledges
that it has, independently and without reliance on the Assignor, and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrower.
<PAGE>
SECTION 6. AMENDMENT. The Pledge Agreement is hereby amended so that
Section 8.11 thereof shall read in its entirety as follows:
SECTION 8.11. INTERACTION OF BORROWER WITH BANKS AND AGENT. Upon any
assignment of any interest of any Bank to a third party pursuant to
the Credit Agreement, such third party shall be deemed to be a Bank
for purposes of this Agreement to the extent of the interest so
assigned.
SECTION 7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW PROVISIONS THEREOF.
SECTION 8. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
WESTPAC BANKING CORPORATION
By: /s/ Anne K. Sadler
-----------------------------
Title: Vice President
-----------------------------
ASLK-CGER BANK, GRAND CAYMAN BRANCH
By: /s/ John J.S. Mead, Jr.
-----------------------------
Title: Vice President
----------------------------
NOTICE ADDRESS:
c/o New York Branch
10 East 50th Street-22nd Floor
New York, NY 10022
Attn: John J. S. Mead, Jr.
Telecopier: 212-421-0133
<PAGE>
Domestic and Euro-Dollar Lending
Office:
Grand Cayman Branch
c/o New York Branch
10 East 50th Street-22nd Floor
New York, NY 10022
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
-----------------------------
Title: Executive Vice President
----------------------------
and Treasurer
----------------------------
SIGNET BANK/VIRGINIA, as Agent
By: /s/ David H. Olson
----------------------------
Title: Vice President
----------------------------
<PAGE>
Exhibit 4(dd)
<PAGE>
April 28, 1994
Signet Bank/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
ASLK-CGER Bank,
Grand Cayman Branch
c/o New York Branch
10 East 50th Street - 22nd Floor
New York, New York 10022
Re: Fourth Amendment to Amended and
Restated Credit Agreement
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 22, 1992, as amended by the First Amendment thereto dated April 29,
1993, the Second Amendment thereto dated June 30, 1993 and the Third Amendment
thereto dated September 14, 1993 (the "Credit Agreement") among CRIIMI MAE Inc.
(the "Borrower"), the Banks listed on the signature pages thereto (the "Banks")
and Signet Bank/Virginia, as Agent (the "Agent"). Except as otherwise provided,
capitalized terms used herein and not defined shall have the meanings set forth
in the Credit Agreement.
The Borrower has requested that the Credit Agreement be amended as
hereinafter provided to permit the Borrower to incur certain Debt under credit
facilities from Nomura Securities International Inc. and Nomura Asset Capital
Corporation on substantially the terms and conditions specified in the Committed
Master Repurchase Agreement Governing Purchases and Sales of Participation
Certificates and the Committed Master Repurchase Agreement, as amended from time
to time, each dated as of November 30, 1993 from the Borrower to the Agent, a
copy of which are attached as Exhibit A hereto (jointly, the "Additional Nomura
Credit Facility"). The Banks and the Agent are willing to agree to such
requests, subject to the terms and conditions contained herein.
Accordingly, upon the acceptance of this Fourth Amendment by the Banks and
the Agent in the space provided for that purpose below, the parties hereto agree
as follows:
<PAGE>
1. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement is hereby
amended as follows:
a. The definition of CIBC Credit Agreement, contained in Section
1.01 of the Credit Agreement, is hereby amended in its entirety to read as
follows:
"CIBC Credit Agreement" means the Revolving Credit Agreement
dated as of February 28, 1994, among the Borrower, the
lenders named therein and the Canadian Imperial Bank of
Commerce, New York Agency, as Administrative Agent.
b. The definition of Material Debt, contained in Section 1.01 of the
Credit Agreement, is hereby amended in its entirety to read as follows:
"Material Debt" means consolidated Debt (other than the
Notes) of the Borrower, the Liquidating REIT and/or one or
more of their respective Subsidiaries, arising in one or
more related or unrelated transactions, in an aggregate
principal amount exceeding $5,000,000.
c. The Loan Documents, and each of them, and all exhibits thereto
are amended by deleting any reference to "the Guaranty dated as of November
28, 1989 related to the Debt of CRI Funding Corporation under the CIBC
Credit Agreement" and substituting a reference to "the CIBC Credit
Agreement" therefor wherever such words may appear and refer to the debt of
the Borrower or the Material Debt that may be permitted under the Credit
Agreement.
d. Subsection 5.05 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 5.05 Incurrence of Debt.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, issue, assume, guarantee,
<PAGE>
incur or otherwise be or become liable in respect of Debt, if, after
the incurrence of such Debt, there would exist the reasonable
possibility of a material adverse effect on the business, financial
position or results of operations of the Borrower and its
Subsidiaries, considered as a whole, or on the ability of the Borrower
to perform its obligations under the Loan Documents, other than:
(i) Debt of the Borrower to the Banks under the Loan Documents;
(ii) Debt of the Borrower under the Interest Rate Protection
Agreements;
(iii) (A) Debt of the Borrower under the CIBC Credit Agreement,
(B) Debt of the Borrower under the Nomura Credit Facilities, as
defined in the Third Amendment, and the Additional Nomura Credit
Facility, as defined in the Fourth Amendment to Amended and Restated
Credit Agreement dated April 28, 1994 among the Borrower, the Banks
and the Agent and (C) other Debt of the Borrower on terms and
conditions similar to those applicable to the Debt described in
clauses (A) and (B) of this subsection; provided, that the aggregate
amount of all such Debt permitted under this subsection (a)(iii) shall
at no time exceed $650,000,000;
(iv) Debt of the Borrower in an amount not to exceed $20,000,000
incurred in connection with a working capital line of credit, which
shall not be required to be subordinated to Debt to the Banks under
the Loan Documents;
(v) Debt of the Borrower in an amount which does not exceed the
Consolidated Tangible Net Worth of the Borrower, subject to
restrictions reasonably satisfactory to the Banks that the holders of
any such Debt shall not exercise any right or remedy in connection
therewith before the date that is one year after the Termination Date;
<PAGE>
(vi) accrued dividends not otherwise prohibited under the Loan
Documents;
(vii) accounts payable and accrued expenses incurred in the
ordinary course of business with maturities not exceeding one year;
and
(viii) other Debt expressly approved by the Required Banks, which
approval shall not be unreasonably withheld.
(b) Notwithstanding the foregoing or any other provision
contained herein, the Borrower will not permit the ratio of (i) Debt
of the Borrower and its Consolidated Subsidiaries, other than accounts
payable and accrued expenses incurred in the ordinary course of
business with maturities not exceeding one year, to (ii) consolidated
stockholders' equity of the Borrower and its Consolidated
Subsidiaries, to exceed 2.5 to 1.
2. REPRESENTATIONS AND WARRANTIES.
a. The Borrower represents and warrants that, (i) all
representations and warranties made in or in connection with the Credit
Agreement, this Fourth Amendment and each other Loan Document are true,
correct and complete on and as of the date hereof and (ii) no event which
would constitute a Default under the Credit Agreement, as amended hereby,
or any other Loan Document has occurred and is continuing.
b. True and correct copies of all documents governing the Additional
Nomura Credit Facility are attached hereto as Exhibit A.
3. CONDITIONS OF AMENDMENT. The agreement of the Banks and the Agent set
forth in Paragraph 1 of this Fourth Amendment is subject to the satisfaction of
the following conditions precedent:
<PAGE>
a. The Banks and the Agent shall have received the following, all of
which must be satisfactory in form and substance to the Banks and the
Agent, in their discretion:
i. this Fourth Amendment, duly executed by the Borrower, the
Banks and the Agent; and
ii. any additional agreements, opinions, certifications,
instruments and other documents relating hereto, to the Additional
Nomura Credit Facility or to the Credit Agreement that any Bank or the
Agent may reasonably deem necessary or desirable.
b. All representations and warranties made in or in connection with
the Credit Agreement, this Fourth Amendment and each other Loan Document,
shall be true, correct and complete on and as of the date hereof.
c. No Default shall have occurred and be continuing.
4. NO CLAIMS OR DEFENSES. The Borrower acknowledges and agrees that its
obligations under the Loan Documents are its valid obligations and, as of the
date hereof, there are no claims, setoffs or defenses to the payment or
performance by the Borrower of such obligations, and that the Banks and the
Agent may enforce the payment and performance of such obligations as set forth
in the Loan Documents.
5. COUNTERPART EXECUTION. This Fourth Amendment may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
6. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW RULES THEREOF.
7. REFERENCES TO CREDIT AGREEMENT. Except as herein specifically amended,
the Credit Agreement shall remain in full
<PAGE>
force and effect in accordance with its terms. Whenever reference is made in any
note, document, letter or conversation, such reference shall, without more, be
deemed to refer to the Credit Agreement, as amended hereby.
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
--------------------------------
Jay R. Cohen
Executive Vice President
& Treasurer
Accepted and agreed to as of
the date first written above:
SIGNET BANK/VIRGINIA
By: /s/ David H. Olson
------------------------------------
David H. Olson, Vice President
ASLK-CGER BANK,
GRAND CAYMAN BRANCH
By: /s/ John J.S. Mead, Jr.
------------------------------------
John J.S. Mead, Jr., Vice President
SIGNET BANK/VIRGINIA, as Agent
By: /s/ Barry Cooper
------------------------------------
Barry Cooper, Vice President
<PAGE>
Exhibit 4(ee)
<PAGE>
December 9, 1994
Signet Bank/Virginia
8330 Boone Boulevard
Vienna, Virginia 22182-2632
ASLK-CGER Bank,
Grand Cayman Branch
c/o New York Branch
10 East 50th Street - 22nd Floor
New York, New York 10022
Re: Fifth Amendment to Credit Agreement
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement dated as of
December 22, 1992, as amended by the First Amendment thereto dated April 29,
1993, the Second Amendment thereto dated June 30, 1993, the Third Amendment
thereto dated September 14, 1993 and the Fourth Amendment thereto dated April
28, 1994 (the "Credit Agreement") among CRIIMI MAE Inc. (the "Borrower"), the
Banks listed on the signature pages thereto (the "Banks") and Signet
Bank/Virginia, as Agent (the "Agent"). Except as otherwise provided, capitalized
terms used herein and not defined shall have the meanings set forth in the
Credit Agreement.
The Borrower has requested that (A) Section 5.05(b) of the Credit Agreement
be amended to provide that the ratio of (i) Debt of the Borrower and its
Consolidated Subsidiaries (excluding accounts payable and certain accrued
expenses) to (ii) consolidated stockholders' equity of the Borrower and its
Consolidated Subsidiaries, will not exceed 3 to 1 and (B) Section 5.07 of the
Credit Agreement be amended to reduce the unencumbered asset requirement to
$5,000,000. The Banks and the Agent are willing to agree to such requests,
subject to the terms and conditions contained herein.
Accordingly, upon the acceptance of this Fifth Amendment to the Credit
Agreement by the Banks and the Agent in the space provided for that purpose
below, the parties hereto agree as follows:
<PAGE>
1. Amendments to the Credit Agreement.
(a) Section 5.05 of the Credit Agreement is hereby
amended in its entirety to read as follows:
SECTION 5.05 Incurrence of Debt.
(a) The Borrower will not, and will not permit any of its
Subsidiaries to, issue, assume, guarantee, incur or otherwise be or
become liable in respect of Debt, if, after the incurrence of such
Debt, there would exist the reasonable possibility of a material
adverse effect on the business, financial position or results of
operations of the Borrower and its Subsidiaries, considered as a
whole, or on the ability of the Borrower to perform its obligations
under the Loan Documents, other than:
(i) Debt of the Borrower to the Banks under the Loan Documents;
(ii) Debt of the Borrower under the Interest Rate Protection
Agreements;
(iii) (A) Debt of the Borrower under the CIBC Credit Agreement,
(B) Debt of the Borrower under (x) the Nomura Credit Facilities, as
defined in the Third Amendment to the Credit Agreement dated September
14, 1993 and (y) the Committed Master Repurchase Agreement Governing
Purchases and Sales of Participation Certificates and the Committed
Master Repurchase Agreement, each as amended from time to time, each
dated as of November 30, 1993 and each attached as Exhibit A to the
Fourth Amendment to the Credit Agreement dated April 28, 1994
(jointly, the "Additional Nomura Credit Facility") and (C) other Debt
of the Borrower on terms and conditions similar to those applicable to
the Debt described in clauses (A) and (B) of this subsection;
provided, that the aggregate amount of all such Debt permitted under
this subsection (a)(iii) shall at no time exceed $650,000,000;
(iv) Debt of the Borrower in an amount not to exceed $20,000,000
incurred in connection with a working capital line of credit, which
shall not be required to be subordinated to Debt to the Banks under
<PAGE>
the Loan Documents;
(v) Debt of the Borrower in an amount which does not exceed the
Consolidated Tangible Net Worth of the Borrower, subject to
restrictions reasonably satisfactory to the Banks that the holders of
any such Debt shall not exercise any right or remedy in connection
therewith before the date that is one year after the Termination Date;
(vi) accrued dividends not otherwise prohibited under the Loan
Documents;
(vii) accounts payable and accrued expenses incurred in the
ordinary course of business with maturities not exceeding one year;
and
(viii) other Debt expressly approved by the Required Banks, which
approval shall not be unreasonably withheld.
(b) Notwithstanding the foregoing or any other provision
contained herein, the Borrower will not permit the ratio of (i) Debt
of the Borrower and its Consolidated Subsidiaries, other than accounts
payable and accrued expenses incurred in the ordinary course of
business with maturities not exceeding one year, to (ii) consolidated
stockholders' equity of the Borrower and its Consolidated
Subsidiaries, to exceed 3 to 1.
(b) Section 5.07 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 5.07 Negative Pledge. In addition to any Collateral
pledged to secure the Obligations of the Borrower under the Pledge Agreement,
the Borrower shall maintain assets that qualify as Eligible Collateral with a
Fair Market Value equal to not less than $5,000,000, free and clear of any
restriction including, without limitation, any negative pledge other than the
negative pledge created by this Section 5.07, and shall not create, assume or
suffer to exist any Lien on any such assets.
2. Representations and Warranties. The Borrower represents and warrants
that, (i) all representations and warranties made in or in connection with the
Credit Agreement, this Fifth Amendment thereto and each other Loan Document are
true, correct
<PAGE>
and complete on and as of the date hereof and (ii) no event which would
constitute a Default under the Credit Agreement, as amended hereby, or any other
Loan Document has occurred and is continuing.
3. Conditions of Amendment. The agreement of the Banks and the Agent set
forth in Paragraph 1 of this Fifth Amendment to the Credit Agreement is subject
to the satisfaction of the following conditions precedent:
a. The Banks and the Agent shall have received the following,
all of which must be satisfactory in form and substance to the Banks
and the Agent, in their discretion:
i. this Fifth Amendment to the Credit Agreement, duly executed
by the Borrower, the Banks and the Agent; and
ii. any additional agreements, opinions, certifications,
instruments and other documents relating to this Fifth
Amendment to the Credit Agreement or the Credit Agreement
that any Bank or the Agent may reasonably deem necessary or
desirable.
b. All representations and warranties made in or in connection
with the Credit Agreement, this Fifth Amendment thereto and each other
Loan Document, shall be true, correct and complete on and as of the
date hereof.
c. No Default shall have occurred and be continuing.
4. No Claims or Defenses. The Borrower acknowledges and agrees that its
obligations under the Loan Documents are its valid obligations and, as of the
date hereof, there are no claims, setoffs or defenses to the payment or
performance by the Borrower of such obligations, and that the Banks and the
Agent may enforce the payment and performance of such obligations as set forth
in the Loan Documents.
5. Counterpart Execution. This Fifth Amendment to the Credit Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument.
6. GOVERNING LAW. THIS FIFTH AMENDMENT TO THE CREDIT AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN
<PAGE>
ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF VIRGINIA WITHOUT GIVING EFFECT
TO THE CHOICE OF LAW RULES THEREOF.
7. References to Credit Agreement. Except as herein specifically
amended, the Credit Agreement shall remain in full force and effect in
accordance with its terms. Whenever reference is made in any note, document,
letter or conversation, such reference shall, without more, be deemed to refer
to the Credit Agreement, as amended hereby.
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
-------------------------------
Jay R. Cohen
Executive Vice President
& Treasurer
Accepted and agreed to as of
the date first written above:
SIGNET BANK/VIRGINIA
By: /s/ Barry E. Cooper
-----------------------------------
Barry E. Cooper, Vice President
ASLK-CGER BANK,
GRAND CAYMAN BRANCH
By: /s/ John J.S. Mead, Jr.
-----------------------------------
John J.S. Mead, Jr., Vice President
SIGNET BANK/VIRGINIA, as Agent
By: /s/ Barry E. Cooper
-----------------------------------
Barry E. Cooper, Vice President
<PAGE>
Exhibit 4(ff)
<PAGE>
Public Securities Association
40 Broad Street, New York, NY 10004-2373
Telephone (212) 809-7000
Master Repurchase Agreement
Dated as of September 1, 1994
Between:
Citibank, N.A. and/or Citicorp Securities, Inc.
and
CRIIMI MAE Inc.
1. Applicability
From time to time the parties hereto may enter into transactions in which
one party ("Seller") agrees to transfer to the other ("Buyer") securities or
financial instruments ("Securities") against the transfer of funds by Buyer,
with a simultaneous agreement by Buyer to transfer to Seller such Securities
at a date certain or on demand, against the transfer of funds by Seller. Each
such transaction shall be referred to herein as a "Transaction" and shall be
governed by this Agreement, including any supplemental terms or conditions
contained in Annex I hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the commencement by
such party as debtor of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar official for such
party or any substantial part of its property, or (ii) the commencement of any
such case or proceeding against such party, or another seeking such an
appointment, or the filing against a party of an application for a protective
decree under the provisions of the Securities Investor Protection Act of 1970,
<PAGE>
which (A) is consented to or not timely contested by such party, (B) results in
the entry of an order for relief, such an appointment, the issuance of such a
protective decree or the entry of an order having a similar effect, or (C) is
not dismissed within 15 days, (iii) the making by a party of a general
assignment for the benefit of creditors, or (iv) the admission in writing by a
party of such party's inability to pay such party's debts as they become due;
(b)"Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal
to the percentage that is agreed to as the Seller's Margin Amount under
subparagraph (q) of this
<PAGE>
Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any
principal thereof then payable and all interest, dividends or other
distributions thereon;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value", with respect to any Securities
as of any date, the price for such Securities on such date obtained from a
generally recognized source agreed to by the parties or the most recent closing
bid quotation from such a source, plus accrued Income to the extent not included
therein (other than any Income credited or transferred to, or applied to the
obligations of, Seller pursuant to Paragraph 5 hereof) as of such date
(unless contrary to market practice for such Securities);
(i) "Price Differential", with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing Rate
for such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the date of determination (reduced by any amount of such Price Differential
previously paid by Seller to Buyer with respect to such Transaction);
(j) "Pricing Rate", the per annum percentage rate for determination of the
Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial banks as
published in The Wall Street Journal;
(l) "Purchase Date", the date on which Purchased Securities are transferred
by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter,
such price increased by the amount of any cash transferred by Buyer to Seller
pursuant to Paragraph 4(b) hereof and decreased by the amount of any cash
transferred by
<PAGE>
Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to reduce Seller's
obligations under clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities", the Securities transferred by Seller to Buyer
in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with
respect to any Transaction at any time also shall include Additional Purchased
Securities delivered pursuant to Paragraph 4(a) and shall exclude Securities
returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by application of
the provisions of Paragraphs 3(c) or 11 hereof;
<PAGE>
(p) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Buyer's Margin Amount under subparagraph
(c) of this Paragraph), agreed to by Buyer and Seller prior to entering into
the Transaction, to the Repurchase Price for such Transaction as of such date.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller. On the Purchase Date for
the Transaction, the Purchased Securities shall be transferred to Buyer or its
agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller
(or both), as shall be agreed, shall promptly deliver to the other party a
written confirmation of each Transaction (a "Confirmation"). The Confirmation
shall describe the Purchased Securities (including CUSIP number, if any),
identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on
demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction,
and (v) any additional terms or conditions of the Transaction not inconsistent
with this Agreement. The Confirmation, together with this Agreement, shall
constitute conclusive evidence of the terms agreed between Buyer and Seller with
respect to the Transaction to which the Confirmation relates, unless with
respect to the Confirmation specific objection is made promptly after receipt
thereof. In the event of any conflict between the terms of such Confirmation
and this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such
<PAGE>
demand shall be made by Buyer or Seller, no later than such time as is customary
in accordance with market practice, by telephone or otherwise on or prior to the
business day on which such termination will be effective. On the date specified
in such demand, or on the date fixed for termination in the case of Transactions
having a fixed term, termination of the Transaction will be effected by transfer
to Seller or its agent of the Purchased Securities and any Income in respect
thereof received by Buyer (and not previously credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against
the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
<PAGE>
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions
(a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such
Transactions, at Seller's option, to transfer to Buyer cash or additional
Securities reasonably acceptable to Buyer ("Additional Purchased Securities"),
so that the cash and aggregate Market Value of the Purchased Securities,
including any such Additional Purchased Securities, will thereupon equal or
exceed such aggregate Buyer's Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which such Buyer
is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at
such time (a "Margin Excess"), then Seller may by notice to Buyer require
Buyer in such Transactions, at Buyer's option, to transfer cash or Purchased
Securities to Seller, so that the aggregate Market Value of the Purchased
Securities, after deduction of any such cash or any Purchased Securities so
transferred, will thereupon not exceed such aggregate Seller's Margin Amount
(increased by the amount of any Margin Excess as of such date arising from any
Transactions in which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to
such Transactions as shall be agreed upon by Buyer and Seller.
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both) under
subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin
Deficit or Margin Excess exceeds a specified dollar amount or a specified
percentage of the Repurchase Prices for such Transactions (which amount or
percentage shall be agreed to by Buyer and Seller prior to entering into any
such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under subparagraphs
(a) and (b) of this Paragraph to require the elimination of a Margin Deficit or
a Margin Excess,
<PAGE>
as the case may be, may be exercised whenever such a Margin Deficit or Margin
Excess exists with respect to any single Transaction hereunder (calculated
without regard to any other Transaction outstanding under this Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment date
on the Securities subject to that Transaction, Buyer shall, as the parties may
agree with respect to such Transaction (or, in the absence of any agreement, as
Buyer shall reasonably determine in its discretion), on the date such Income
is payable either (i) transfer to or credit to the account of Seller an amount
equal to such Income payment or payments with respect to any Purchased
Securities subject to such Transaction or (ii)
<PAGE>
apply the Income payment or payments to reduce the amount to be transferred to
Buyer by Seller upon termination of the Transaction. Buyer shall not be
obligated to take any action pursuant to the preceding sentence to the extent
that such action would result in the creation of a Margin Deficit, unless prior
thereto or simultaneously therewith Seller transfers to Buyer cash or Additional
Purchased Securities sufficient to eliminate such Margin Deficit.
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and shall
be deemed to have granted to Buyer a security interest in, all of the Purchased
Securities with respect to all Transactions hereunder and all proceeds thereof.
7. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall be
in immediately available funds. All Securities transferred by one party hereto
to the other party (i) shall be in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
such other documentation as the party receiving possession may reasonably
request, (ii) shall be transferred on the bookentry system of a Federal Reserve
Bank, or (iii) shall be transferred by any other method mutually acceptable to
Seller and Buyer. As used herein with respect to Securities, "transfer" is
intended to have the same meaning as when used in Section 8-313 of the New York
Uniform Commercial Code or, where applicable, in any federal regulation
governing transfers of the Securities.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its possession
and shall be identified as subject to this Agreement. Segregation may be
accomplished by appropriate identification on the books and records of the
<PAGE>
holder, including a financial intermediary or a clearing corporation. Title
to all Purchased Securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall relieve
Buyer of its obligations to transfer Purchased Securities to Seller pursuant to
Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay Income
to, or apply Income to the obligations of, Seller pursuant to Paragraph 5
hereof.
Required Disclosure for Transactions in Which the Seller Retains Custody of the
Purchased Securities
<PAGE>
Seller is not permitted to substitute other securities for those subject to this
Agreement and therefore must keep Buyer's securities segregated at all times,
unless in this Agreement Buyer grants Seller the right to substitute other
securities. If Buyer grants the right to substitute, this means that Buyer's
securities will likely be commingled with Seller's own securities during the
trading day. Buyer is advised that, during any trading day that Buyer's
securities are commingled with Seller's securities, they [will]* [may]** be
subject to liens granted by Seller to [its clearing bank]* [third parties]** and
may be used by Seller for deliveries on other securities transactions. Whenever
the securities are commingled, Seller's ability to resegregate substitute
securities for Buyer will be subject to Seller's ability to satisfy [the
clearing]* [any]** lien or to obtain substitute securities.
<PAGE>
*Language to be used under 17 C.F.R. 403.4(e) if Seller is a government
securities broker or dealer other than a financial institution
** Language to be used under 17 C.F.R. 403.5(d) if Seller is a financial
institution
<PAGE>
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such substitution
shall be made by transfer to Buyer of such other Securities and transfer to
Seller of such Purchased Securities. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of
Purchased Securities, the parties expressly agree that Buyer shall be deemed,
for purposes of subparagraph (a) of this Paragraph, to have agreed to and
accepted in this Agreement substitution by Seller of other Securities for
Purchased Securities; provided, however, that such other Securities shall
have a Market Value at least equal to the Market Value of the Purchased
Securities for which they are substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal), (iv) it has obtained all authorizations of any
governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(v) the execution, delivery and performance of this Agreement and the
Transactions hereunder will not violate any law, ordinance, charter, by-law or
rule applicable to it or any agreement by which it is bound or by which any of
its assets are affected. On the Purchase Date for any Transaction Buyer and
Seller shall each be deemed to repeat all the foregoing representations made by
it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer
<PAGE>
fails to transfer Purchased Securities upon the applicable Repurchase Date, (ii)
Seller or Buyer fails, after one business day's notice, to comply with Paragraph
4 hereof, (iii) Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of
Insolvency occurs with respect to Seller or Buyer, (v) any representation made
by Seller or Buyer shall have been incorrect or untrue in any material respect
when made or repeated or deemed to have been made or repeated, or (vi) Seller or
Buyer shall admit to the other its inability to, or its intention not to,
perform any of its obligations hereunder (each an "Event of Default"):
(a) At the option of the nondefaulting party, exercised by written notice
to the defaulting party (which option shall be deemed to have been exercised,
even if no notice is given,
<PAGE>
immediately upon the occurrence of an Act of Insolvency), the Repurchase Date
for each Transaction hereunder shall be deemed immediately to occur.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's
obligations hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable, (ii) to the
extent permitted by applicable law, the Repurchase Price with respect to each
such Transaction shall be increased by the aggregate amount obtained by daily
application of (x) the greater of the Pricing Rate for such Transaction or the
Prime Rate to (y) the Repurchase Price for such Transaction as of the Repurchase
Date as determined pursuant to subparagraph (a) of this Paragraph (decreased as
of any day by (A) any amounts retained by the nondefaulting party with respect
to such Repurchase Price pursuant to clause (iii) of this subparagraph, (B) any
proceeds from the sale of Purchased Securities pursuant to subparagraph (d)(i)
of this Paragraph, and (C) any amounts credited to the account of the defaulting
party pursuant to subparagraph (e) of this Paragraph) on a 360 day per year
basis for the actual number of days during the period from and including the
date of the Event of Default giving rise to such option to but excluding the
date of payment of the Repurchase Price as so increased, (iii) all Income paid
after such exercise or deemed exercise shall be retained by the nondefaulting
party and applied to the aggregate unpaid Repurchase Prices owed by the
defaulting party, and (iv) the defaulting party shall immediately deliver to the
nondefaulting party any Purchased Securities subject to such Transactions then
in the defaulting party's possession.
(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate Repurchase
Prices for all such Transactions, the defaulting party's right, title and
interest in all Purchased Securities subject to such Transactions shall be
deemed transferred to the nondefaulting party, and the defaulting party shall
deliver all such Purchased Securities to the nondefaulting party.
<PAGE>
(d) After one business day's notice to the defaulting party (which notice
need not be given if an Act of Insolvency shall have occurred, and which may be
the notice given under subparagraph (a) of this Paragraph or the notice referred
to in clause (ii) of the first sentence of this Paragraph), the nondefaulting
party may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in a recognized market at such price or
prices as the nondefaulting party may reasonably deem satisfactory, any or
all Purchased Securities subject to such Transactions and apply the
proceeds thereof to the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder or (B) in its sole
discretion elect, in lieu of selling all or a portion of such Purchased
Securities, to give the defaulting party credit for such Purchased
Securities in an amount equal to the price therefor on such date, obtained
from a generally recognized source or the most recent closing bid quotation
from such a source, against the aggregate unpaid Repurchase Prices and any
other amounts owing by the defaulting party hereunder; and
(ii) as to Transactions in which the defaulting party is acting as
Buyer, (A) purchase securities ("Replacement Securities") of the same class
and amount as any Purchased Securities that are not delivered by the
defaulting party to the nondefaulting party as required hereunder or (B) in
its sole discretion elect, in lieu of purchasing Replacement Securities, to
be deemed to have purchased Replacement Securities at the price therefor on
such date, obtained from a generally recognized source or the most recent
closing bid quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as Buyer,
the defaulting party shall be liable to the nondefaulting party (i) with respect
to Purchased Securities (other than Additional Purchased Securities), for any
excess of the price paid (or deemed paid) by the nondefaulting party for
Replacement Securities therefor over the Repurchase Price for such Purchased
Securities and (ii) with respect to Additional Purchased Securities, for the
price paid (or deemed paid) by the nondefaulting party for the Replacement
Securities therefor. In addition, the defaulting party shall be liable to the
nondefaulting party for interest on such remaining liability with respect to
each such purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such interest
shall be at a rate
<PAGE>
equal to the greater of the Pricing Rate for such Transaction or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is acting as
Buyer shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by the
nondefaulting party of its option under subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or as a consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the
Pricing Rate for the relevant Transaction or the Prime Rate.
(h) The nondefaulting party shall have, in addition to its
rights hereunder, any rights otherwise available to it under any other agreement
or applicable law.
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon the
fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and
(iii) that payments, deliveries and other transfers made by either of them in
respect of any Transaction shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective party to
whom any notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in Annex II attached hereto.
<PAGE>
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
15. Non-assignability; Termination
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be cancelled by
either party upon giving written notice to the other, except that this Agreement
shall, notwithstanding such notice, remain applicable to any Transactions then
outstanding.
16. Governing Law
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
17. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Without limitation on any of the foregoing, the failure to give
a notice pursuant to subparagraphs 4(a) or 4(b) hereof will not constitute
a waiver of any right to do so at a later date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by either party hereto (the "Plan Party") in a Transaction, the Plan Party
shall so notify the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction does
<PAGE>
not constitute a prohibited transaction under ERISA or is otherwise exempt
therefrom, and the other party may proceed in reliance thereon but shall not be
required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph,
any such Transaction shall proceed only if Seller furnishes or has furnished to
Buyer its most recent available audited statement of its financial condition and
its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller
shall be deemed (i) to represent to Buyer that since the date of seller's latest
such financial statements, there has been no material adverse change in Seller's
financial condition which Seller has not disclosed to Buyer, and (ii) to
agree to provide Buyer with future audited and unaudited statements of its
financial condition as they are issued, so long as it is a Seller in any
outstanding Transaction involving a Plan Party.
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 1.01 of Title 11 of the United
States Code, as amended (except insofar as the type of Securities subject to
such Transaction or the term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Paragraph 11 hereof, is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of Title 11 of
the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) In the case of Transactions in which one of the parties is a broker or
dealer registered with the Securities and Exchange Commission ("SEC") under
Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the Securities
Investor Protection Corporation has taken the position that the provisions
of the Securities Investor Protection Act of 1970 ("SIPA") do not protect the
other party with respect to any Transaction hereunder;
(b) In the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered with
the SEC under Section 15C of the 1934 Act,
<PAGE>
SIPA will not provide protection to the other party with respect to any
Transaction hereunder; and
(c) In the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a Transaction
hereunder are not a deposit and therefore are not insured by the Federal Deposit
Insurance Corporation, the Federal Savings and Loan Insurance Corporation
or the National Credit Union Share Insurance Fund, as applicable.
Citibank, N.A. and/or CRIIMI MAE Inc.
Citicorp Securities, Inc.
By: Frank C. Forelle By: Jay R. Cohen
-------------------------------- ------------------------------
Title: Vice President Title: Executive Vice President
Date: September 7, 1994 Date: September 1, 1994
<PAGE>
ANNEX I
Supplemental Terms and Conditions
TO BE SUPPLIED IN CONFIRMATION LETTER
<PAGE>
Addendum to the Master Repurchase Agreement
Dated as of September 1, 1994, between
Citicorp Securities, Inc., and CRIIMI MAE
1. "Buyer" (Citicorp Securities, Inc.) can terminate this
agreement at any time. If Buyer terminates this agreement the "Seller"
(CRIIMI MAE) has an option at current Citicorp Securities, Inc. rates to
extend for a period not to exceed six (6) months from the termination of
this agreement.
2. Seller at its option may seek three (3) bids from other securities dealers,
in a manner acceptable to Buyer, to determine the value of the securities.
The three bids will be averaged to determine the market value of the
securities.
3. This agreement expires no later than 364 days from its inception.
<PAGE>
ANNEX II
Names and Addresses for Communications Between Parties
CRIIMI MAE, Inc.
CRI, Inc.
The CRI Building
11200 Rockville Pike
Rockville, Maryland 20852
Attn: William B. Dockser
Citibank, N.A.
Credit Administration
399 Park Avenue
4th Floor, Zone 5
New York, NY 10043
<PAGE>
Exhibit 4(gg)
<PAGE>
Deutsche Bank Securities
Master Repurchase Agreement
Dated as of December 30, 1994
Between:
Deutsche Bank Securities Corporation
and
CRIIMI MAE Inc.
1. Applicability
From time to time the parties hereto may enter into transactions in which
one party ("Seller") agrees to transfer to the other ("Buyer") securities or
financial instruments ("Securities") against the transfer of funds by Buyer,
with a simultaneous agreement by Buyer to transfer to Seller such Securities at
a date certain or on demand, against the transfer of funds by Seller. Each such
transaction shall be referred to herein as a "Transaction" and shall be
governed by this Agreement, including any supplemental terms or conditions
contained in Annex I hereto, unless otherwise agreed in writing.
2. Definitions
(a) "Act of Insolvency", with respect to any party, (i) the commencement by
such party as debtor of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law, or such party seeking
the appointment of a receiver, trustee, custodian or similar official for such
party or any substantial part of its property, or (ii) the commencement of any
such case or proceeding against such party, or another seeking such an
appointment, or the filing against a party of an application for a protective
decree under the provisions of the Securities Investor Protection Act of 1970,
which (A) is consented to or not timely contested by such party, (B) results in
the entry of an order for relief, such an
<PAGE>
appointment, the issuance of such a protective decree or the entry of an order
having a similar effect, or (C) is not dismissed within 15 days, (iii) the
making by a party of a general assignment for the benefit of creditors, or (iv)
the admission in writing by a party of such party's inability to pay such
party's debts as they become due;
(b) "Additional Purchased Securities", Securities provided by Seller to
Buyer pursuant to Paragraph 4(a) hereof;
(c) "Buyer's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Seller's Margin Amount under
subparagraph (q) of this Paragraph), agreed to by Buyer and Seller prior to
entering into the Transaction, to the Repurchase Price for such Transaction as
of such date;
(d) "Confirmation", the meaning specified in Paragraph 3(b) hereof;
(e) "Income", with respect to any Security at any time, any principal
thereof then payable and all interest, dividends or other distributions thereon;
(f) "Margin Deficit", the meaning specified in Paragraph 4(a) hereof;
(g) "Margin Excess", the meaning specified in Paragraph 4(b) hereof;
(h) "Market Value", with respect to any Securities as of any date, the
price for such Securities on such date obtained from a generally recognized
source agreed to by the parties or the most recent closing bid quotation from
such a source, plus accrued Income to the extent not included therein (other
than any Income credited or transferred to, or applied to the obligations of,
Seller pursuant to Paragraph 5 hereof) as of such date (unless contrary to
market practice for such Securities);
(i) "Price Differential", with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing Rate
for such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the date of determination (reduced by any amount of such Price Differential
previously paid by Seller to Buyer with respect to such Transaction);
(j) "Pricing Rate", the per annum percentage rate for determination of the
Price Differential;
(k) "Prime Rate", the prime rate of U.S. money center commercial banks as
published in THE WALL STREET JOURNAL;
(l) "Purchase Date", the date on which Purchased Securities
<PAGE>
are transferred by Seller to Buyer;
(m) "Purchase Price", (i) on the Purchase Date, the price at which
Purchased Securities are transferred by Seller to Buyer, and (ii) thereafter,
such price increased by the amount of any cash transferred by Buyer to Seller
pursuant to paragraph 4(b) hereof and decreased by the amount of any cash
transferred by Seller to Buyer pursuant to Paragraph 4(a) hereof or applied to
reduce Seller's obligations under clause (ii) of Paragraph 5 hereof;
(n) "Purchased Securities", the Securities transferred by Seller to Buyer
in a Transaction hereunder, and any Securities substituted therefor in
accordance with Paragraph 9 hereof. The term "Purchased Securities" with respect
to any Transaction at any time also shall include Additional Purchased
Securities delivered pursuant to Paragraph 4(a) and shall exclude Securities
returned pursuant to Paragraph 4(b);
(o) "Repurchase Date", the date on which Seller is to repurchase the
Purchased Securities from Buyer, including any date determined by application of
the provisions of Paragraphs 3(c) or 11 hereof;
(p) "Repurchase Price", the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination, increased by any amount determined by the application of the
provisions of Paragraph 11 hereof;
(q) "Seller's Margin Amount", with respect to any Transaction as of any
date, the amount obtained by application of a percentage (which may be equal to
the percentage that is agreed to as the Buyer's Margin Amount under subparagraph
(c) of this Paragraph), agreed to by Buyer and Seller prior to entering into the
Transaction, to the Repurchase Price for such Transaction as of such date.
3. Initiation; Confirmation; Termination
(a) An agreement to enter into a Transaction may be made orally or in
writing at the initiation of either Buyer or Seller. On the Purchase Date for
the Transaction, the Purchased Securities shall be transferred to Buyer or its
agent against the transfer of the Purchase Price to an account of Seller.
(b) Upon agreeing to enter into a Transaction hereunder, Buyer or Seller
(or both), as shall be agreed, shall promptly deliver to the other party a
written confirmation of each Transaction (a "Confirmation"). The Confirmation
shall describe the Purchased Securities (including CUSIP number, if any),
<PAGE>
identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on
demand, (iv) the Pricing Rate or Repurchase Price applicable to the Transaction,
and (v) any additional terms or conditions of the Transaction not inconsistent
with this Agreement. The Confirmation, together with this Agreement, shall
constitute conclusive evidence of the terms agreed between Buyer and Seller with
respect to the Transaction to which the Confirmation relates, unless with
respect to the Confirmation specific objection is made promptly after receipt
thereof. In the event of any conflict between the terms of such Confirmation and
this Agreement, this Agreement shall prevail.
(c) In the case of Transactions terminable upon demand, such demand shall
be made by Buyer or Seller, no later than such time as is customary in
accordance with market practice, by telephone or otherwise on or prior to the
business day on which such termination will be effective. On the date specified
in such demand, or on the date fixed for termination in the case of Transactions
having a fixed term, termination of the Transaction will be effected by transfer
to Seller or its agent of the Purchased Securities and any Income in respect
thereof received by Buyer (and not previously credited or transferred to, or
applied to the obligations of, Seller pursuant to Paragraph 5 hereof) against
the transfer of the Repurchase Price to an account of Buyer.
4. Margin Maintenance
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Buyer is less than the aggregate Buyer's Margin Amount for all such Transactions
(a "Margin Deficit"), then Buyer may by notice to Seller require Seller in such
Transactions, at Seller's option, to transfer to Buyer cash or additional
Securities reasonably acceptable to Buyer ("Additional Purchased Securities"),
so that the cash and aggregate Market Value of the Purchased Securities,
including any such Additional Purchased Securities, will thereupon equal or
exceed such aggregate Buyer's Margin Amount (decreased by the amount of any
Margin Deficit as of such date arising from any Transactions in which such Buyer
is acting as Seller).
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions in which a particular party hereto is acting as
Seller exceeds the aggregate Seller's Margin Amount for all such Transactions at
such time (a
<PAGE>
"Margin Excess"), then Seller may by notice to Buyer require Buyer in such
Transactions, at Buyer's option, to transfer cash or Purchased Securities to
Seller, so that the aggregate Market Value of the Purchased Securities, after
deduction of any such cash or any Purchased Securities so transferred, will
thereupon not exceed such aggregate Seller's Margin Amount (increased by the
amount of any Margin Excess as of such date arising from any Transactions in
which such Seller is acting as Buyer).
(c) Any cash transferred pursuant to this Paragraph shall be attributed to
such Transactions as shall be agreed upon by Buyer and Seller.
(d) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer or Seller (or both) under
subparagraphs (a) and (b) of this Paragraph may be exercised only where a Margin
Deficit or Margin Excess exceeds a specified dollar amount or a specified
percentage of the Repurchase Prices for such Transactions (which amount or
percentage shall be agreed to by Buyer and Seller prior to entering into any
such Transactions).
(e) Seller and Buyer may agree, with respect to any or all Transactions
hereunder, that the respective rights of Buyer and Seller under subparagraphs
(a) and (b) of this Paragraph to require the elimination of a Margin Deficit or
a Margin Excess, as the case may be, may be exercised whenever such a Margin
Deficit or Margin Excess exists with respect to any single Transaction hereunder
(calculated without regard to any other Transaction outstanding under this
Agreement).
5. Income Payments
Where a particular Transaction's term extends over an Income payment date
on the Securities subject to that Transaction, Buyer shall, as the parties may
agree with respect to such Transaction (or, in the absence of any agreement, as
Buyer shall reasonably determine in its discretion), on the date such Income is
payable either (i) transfer to or credit to the account of Seller an amount
equal to such Income payment or payments with respect to any Purchased
Securities subject to such Transaction or (ii) apply the Income payment or
payments to reduce the amount to be transferred to Buyer by Seller upon
termination of the Transaction. Buyer shall not be obligated to take any action
pursuant to the preceding sentence to the extent that such action would result
in the creation of a Margin Deficit, unless prior thereto or simultaneously
therewith Seller transfers to Buyer cash or Additional Purchased Securities
sufficient to eliminate such Margin Deficit.
<PAGE>
6. Security Interest
Although the parties intend that all Transactions hereunder be sales and
purchases and not loans, in the event any such Transactions are deemed to be
loans, Seller shall be deemed to have pledged to Buyer as security for the
performance by Seller of its obligations under each such Transaction, and
shall be deemed to have granted to Buyer a security interest in, all of the
Purchased Securities with respect to all Transactions hereunder and all proceeds
thereof.
7. Payment and Transfer Unless otherwise mutually agreed, all transfers of
funds hereunder shall be in immediately available funds. All Securities
transferred by one party hereto to the other party (i) shall be in suitable form
for transfer or shall be accompanied by duly executed instruments of transfer or
assignment in blank and such other documentation as the party receiving
possession may reasonably request, (ii) shall be transferred on the bookentry
system of a Federal Reserve Bank, or (iii) shall be transferred by any other
method mutually acceptable to Seller and Buyer. As used herein with respect to
Securities, "transfer" is intended to have the same meaning as when used in
Section 8-313 of the New York Uniform Commercial Code or, where applicable, in
any federal regulation governing transfers of the Securities.
8. Segregation of Purchased Securities
To the extent required by applicable law, all Purchased Securities in the
possession of Seller shall be segregated from other securities in its possession
and shall be identified as subject to this Agreement. Segregation may be
accomplished by appropriate identification on the books and records of the
holder, including a financial intermediary or a clearing corporation. Title to
all Purchased Securities shall pass to Buyer and, unless otherwise agreed by
Buyer and Seller, nothing in this Agreement shall preclude Buyer from engaging
in repurchase transactions with the Purchased Securities or otherwise pledging
or hypothecating the Purchased Securities, but no such transaction shall relieve
Buyer of its obligations to transfer Purchased Securities to Seller pursuant to
Paragraphs 3, 4 or 11 hereof, or of Buyer's obligation to credit or pay Income
to, or apply Income to the obligations of, Seller pursuant to Paragraph 5
hereof.
Required Disclosure for Transactions in Which the Seller Retains Custody of the
Purchased Securities Seller is not permitted to substitute other securities for
those
<PAGE>
subject to this Agreement and therefore must keep Buyer's securities segregated
at all times, unless in this Agreement Buyer grants Seller the right to
substitute other securities. If Buyer grants the right to substitute, this means
that Buyer's securities will likely be commingled with Seller's own securities
during the trading day. Buyer is advised that, during any trading day that
Buyer's securities are commingled with Seller's securities, they [will]* [may]**
be subject to liens granted by Seller to [its clearing bank]* [third parties]**
and may be used by Seller for deliveries on other securities transactions.
Whenever the securities are commingled, Seller's ability to resegregate
substitute securities for Buyer will be subject to Seller's ability to satisfy
[the clearing]* [any]** lien or to obtain substitute securities.
9. Substitution
(a) Seller may, subject to agreement with and acceptance by Buyer,
substitute other Securities for any Purchased Securities. Such substitution
shall be made by transfer to Buyer of such other Securities and transfer to
Seller of such Purchased Securities. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) In Transactions in which the Seller retains custody of Purchased
Securities, the parties expressly agree that Buyer shall be deemed, for
purposes of subparagraph (a) of this Paragraph, to have agreed to and accepted
in this Agreement substitution by Seller of other Securities for Purchased
Securities; PROVIDED, HOWEVER, that such other Securities shall have a Market
Value at least equal to the Market Value of the Purchased Securities for which
they are substituted.
10. Representations
Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance, (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal), (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal), (iv) it has obtained all authorizations of any
governmental body required in connection with this Agreement and the
Transactions hereunder and such authorizations are in full force and effect and
(v) the execution, delivery and
<PAGE>
performance of this Agreement and the Transactions hereunder will not violate
any law, ordinance, charter, bylaw or rule applicable
*Language to be used under 17 C.F.R. Section 403.4(e) if Seller is a government
securities broker or dealer other than a financial institution
**Language to be used under 17 C.F.R. Section 403.5(d) if Seller is a financial
institution to it or any agreement by which it is bound or by which any of its
assets are affected. On the Purchase Date for any Transaction Buyer and Seller
shall each be deemed to repeat all the foregoing representations made by it.
11. Events of Default
In the event that (i) Seller fails to repurchase or Buyer fails to transfer
Purchased Securities upon the applicable Repurchase Date, (ii) Seller or Buyer
fails, after one business day's notice, to comply with Paragraph 4 hereof, (iii)
Buyer fails to comply with Paragraph 5 hereof, (iv) an Act of Insolvency occurs
with respect to Seller or Buyer, (v) any representation made by Seller or Buyer
shall have been incorrect or untrue in any material respect when made or
repeated or deemed to have been made or repeated, or (vi) Seller or Buyer shall
admit to the other its inability to, or its intention not to, perform any of its
obligations hereunder (each an "Event of Default"):
(a) At the option of the nondefaulting party, exercised by written notice
to the defaulting party (which option shall be deemed to have been exercised,
even if no notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(b) In all Transactions in which the defaulting party is acting as Seller,
if the nondefaulting party exercises or is deemed to have exercised the option
referred to in subparagraph (a) of this Paragraph, (i) the defaulting party's
obligations hereunder to repurchase all Purchased Securities in such
Transactions shall thereupon become immediately due and payable, (ii) to the
extent permitted by applicable law, the Repurchase Price with respect to each
such Transaction shall be increased by the aggregate amount obtained by daily
application of (x) the
<PAGE>
greater of the Pricing Rate for such Transaction or the Prime Rate to (y) the
Repurchase Price for such Transaction as of the Repurchase Date as determined
pursuant to subparagraph (a) of this Paragraph (decreased as of any day by (A)
any amounts retained by the nondefaulting party with respect to such Repurchase
Price pursuant to clause (iii) of this subparagraph, (B) any proceeds from the
sale of Purchased Securities pursuant to subparagraph (d)(i) of this Paragraph,
and (C) any amounts credited to the account of the defaulting party pursuant to
subparagraph (e) of this Paragraph) on a 360 day per year basis for the actual
number of days during the period from and including the date of the Event of
Default giving rise to such option to but excluding the date of payment of the
Repurchase Price as so increased, (iii) all Income paid after such exercise or
deemed exercise shall be retained by the nondefaulting party and applied to the
aggregate unpaid Repurchase Prices owed by the defaulting party, and (iv) the
defaulting party shall immediately deliver to the nondefaulting party any
Purchased Securities subject to such Transactions then in the defaulting party's
possession.
(c) In all Transactions in which the defaulting party is acting as Buyer,
upon tender by the nondefaulting party of payment of the aggregate Repurchase
Prices for all such Transactions, the defaulting party's right, title and
interest in all Purchased Securities subject to such Transactions shall be
deemed transferred to the nondefaulting party, and the defaulting party shall
deliver all such Purchased Securities to the nondefaulting party.
(d) After one business day's notice to the defaulting party (which notice
need not be given if an Act of Insolvency shall have occurred, and which may be
the notice given under subparagraph (a) of this Paragraph or the notice referred
to in clause (ii) of the first sentence of this Paragraph), the nondefaulting
party may:
(i) as to Transactions in which the defaulting party is acting as
Seller, (A) immediately sell, in a recognized market at such price or
prices as the nondefaulting party may reasonably deem satisfactory, any
or all Purchased Securities subject to such Transactions and apply the
proceeds thereof to the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder or (B) in its sole
discretion elect, in lieu of selling all or a portion of such Purchased
Securities, to give the defaulting party credit for such Purchased
Securities in an amount equal to the price therefor on such date, obtained
from a generally recognized source or the
<PAGE>
most recent closing bid quotation from such a source, against the aggregate
unpaid Repurchase Prices and any other amounts owing by the defaulting party
hereunder; and
(ii) as to Transactions in which the defaulting party is acting as
Buyer, (A) purchase securities ("Replacement Securities") of the same class and
amount as any Purchased Securities that are not delivered by the defaulting
party to the nondefaulting party as required hereunder or (B) in its sole
discretion elect, in lieu of purchasing Replacement Securities, to be deemed to
have purchased Replacement Securities at the price therefor on such date,
obtained from a generally recognized source or the most recent closing bid
quotation from such a source.
(e) As to Transactions in which the defaulting party is acting as Buyer,
the defaulting party shall be liable to the nondefaulting party (i) with respect
to Purchased Securities (other than Additional Purchased Securities), for any
excess of the price paid (or deemed paid) by the nondefaulting party for
Replacement Securities therefor over the Repurchase Price for such Purchased
Securities and (ii) with respect to Additional Purchased Securities, for the
price paid (or deemed paid) by the nondefaulting party for the Replacement
Securities therefor. In addition, the defaulting party shall be liable to the
nondefaulting party for interest on such remaining liability with respect to
each purchase (or deemed purchase) of Replacement Securities from the date
of such purchase (or deemed purchase) until paid in full by Buyer. Such interest
shall be at a rate equal to the greater of the Pricing Rate for such Transaction
or the Prime Rate.
(f) For purposes of this Paragraph 11, the Repurchase Price for each
Transaction hereunder in respect of which the defaulting party is acting as
Buyer shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed exercise by the
nondefaulting party of its option under subparagraph (a) of this Paragraph.
(g) The defaulting party shall be liable to the nondefaulting party for
the amount of all reasonable legal or other expenses incurred by the
nondefaulting party in connection with or consequence of an Event of
Default, together with interest thereon at a rate equal to the greater of the
Pricing Rate for the relevant Transaction or the Prime Rate.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other agreement or
applicable law.
<PAGE>
12. Single Agreement
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon the
fact that, all Transactions hereunder constitute a single business and
contractual relationship and have been made in consideration of each other.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and
(iii) that payments, deliveries and other transfers made by either of them in
respect of any Transaction shall be deemed to have been made in consideration of
payments, deliveries and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries and other
transfers may be applied against each other and netted.
13. Notices and Other Communications
Unless another address is specified in writing by the respective party to
whom any notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in Annex II attached hereto.
14. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
15. Non-assignability; Termination
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior written
consent of the other party. Subject to the foregoing, this Agreement and any
Transactions shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be cancelled by
either party upon giving written notice to the other, except that this Agreement
shall, notwithstanding such notice, remain applicable to any
<PAGE>
Transactions then outstanding.
16. Governing Law
This Agreement shall be governed by the laws of the State of New York
without giving effect to the conflict of law principles thereof.
17. No Waivers, Etc. No express or implied waiver of any Event of Default
by either party shall constitute a waiver of any other Event of Default and no
exercise of any remedy hereunder by any party shall constitute a waiver of its
right to exercise any other remedy hereunder. No modification or waiver of any
provision of this Agreement and no consent by any party to a departure herefrom
shall be effective unless and until such shall be in writing and duly executed
by both of the parties hereto. Without limitation on any of the foregoing, the
failure to give a notice pursuant to subparagraphs 4(a) or 4(b) hereof will not
constitute a waiver of any right to do so at a later date.
18. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of the
Employee Retirement Income Security Act of 1974 ("ERISA") are intended to be
used by either party hereto (the "Plan Party") in a Transaction, the Plan Party
shall so notify the other party prior to the Transaction. The Plan Party shall
represent in writing to the other party that the Transaction does not constitute
a prohibited transaction under ERISA or is otherwise exempt therefrom, and the
other party may proceed in reliance thereon but shall not be required so to
proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph,
any such Transaction shall proceed only if Seller furnishes or has furnished to
Buyer its most recent available audited statement of its financial condition and
its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, Seller
shall be deemed (i) to represent to Buyer that since the date of Seller's latest
such financial statements, there has been no material adverse change in Seller's
financial condition which Seller has not disclosed to Buyer, and (ii) to agree
to provide Buyer with future audited and unaudited statements of its financial
condition as they are issued, so long as it is a Seller in any outstanding
Transaction involving a Plan Party.
<PAGE>
19. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the United
States Code, as amended (except insofar as the type of Securities subject to
such Transaction or term of such Transaction would render such definition
inapplicable), and a "securities contract" as that term is defined in Section
741 of Title 11 of the United States Code, as amended.
(b) It is understood that either party's right to liquidate Securities
delivered to it in connection with Transactions hereunder or to exercise any
other remedies pursuant to Paragraph 11 hereof, is a contractual right to
liquidate such Transaction as described in Sections 555 and 559 of Title 11 of
the United States Code, as amended.
20. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or
dealer registered with the Securities and Exchange Commission ("SEC") under
Section 15 of the Securities Exchange Act of 1934 ("1934 Act"), the Securities
Investor Protection Corporation has taken the position that the provisions of
the Securities Investor Protection Act of 1970 ("SIPA") do not protect the other
party with respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer registered with
the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to
the other party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a Transaction
hereunder are not a deposit and therefore are not insured by the Federal Deposit
Insurance Corporation, the Federal Savings and Loan Insurance Corporation or the
National Credit Union Share Insurance Fund, as applicable.
Supplemental Terms
The following supplement terms supplement the Master Repurchase Agreement
dated as of December 30, 1994 (the "Agreement") between Deutsche Bank Securities
Corporation and CRIIMI MAE Inc.
<PAGE>
Disclosure Statement
Deutsche Bank Securities Corporation ("DBSC") herebynotifies you that DBSC
is separately incorporated and an indirect subsidiary of Deutsche Bank AG ("DB")
and an affiliate of other banks owned by DB (each of DB and such other banks
being a "Bank").
DBSC may be a principal or may be engaged in underwritings with respect to,
or may purchase from an affiliate, securities on which advice or brokerage
services are provided.
Any Bank or other affiliates of DBSC may have lending or other credit
relationships with the issuers of securities underwritten or dealt in by DBSC.
You should consult the relevant disclosure documents for details.
Securities sold, offered or recommended by DBSC are not deposits, are not
insured by the Federal Deposit Insurance Corporation, and are not guaranteed by
a Bank, and are not otherwise an obligation or responsibility of a Bank unless
otherwise disclosed to you.
By continuing to do business with DBSC, you will be consenting to the
disclosure by a Bank or any other DBSC affiliate to DBSC (or by DBSC to any Bank
or such affiliate) such information about you or your affiliates as may be in
such party's possession from time to time.
This supplement shall be governed and construed in accordance with the laws of
the State of New york without giving effect to the conflict of laws principles
thereof.
Except as otherwise set forth herein, the Agreement shall remain unchanged and
in full force and effect. From and after the date hereof, any reference to the
Agreement shall be a reference to the Agreement as amended hereby.
Deutsche Bank Securities Corporation CRIIMI MAE Inc.
By /s/ John H. Cutting III By /s/ Jay R. Cohen
__________________________________ ___________________________________
Name John H. Cutting III Name Jay R. Cohen
________________________________ _________________________________
Title Director Title Executive Vice President
_______________________________ ________________________________
Date 12/12/94 Date 12/30/94
________________________________ _________________________________
<PAGE>
Exhibit 4(hh)
<PAGE>
GERMAN AMERICAN CAPITAL CORPORATION
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
Dated as of January 19, 1995
Mr. Jay Cohen
CRIIMI MAE Inc.
11120 Rockville Pike
Rockville, MD 20852
Dear Mr. Cohen:
This letter (this "COMMITMENT LETTER") evidences the commitment among German
American Capital Corporation ("GACC") and CRIIMI MAE Inc. ("CUSTOMER") (i)
whereby GACC will purchase, on a revolving basis, FHA Mortgage Loans (as defined
below) from Customer from time to time for up to an aggregate purchase price of
$300,000,000 minus the aggregate purchase price paid by GACC for GNMA Securities
purchased under the GNMA Facility (as such terms are defined below) (the "FHA
FACILITY") and (ii) whereby GACC will purchase, on a revolving basis, GNMA
Securities from Customer from time to time for up to an aggregate purchase price
of $300,000,000 minus the aggregate purchase price paid by GACC for FHA Mortgage
Loans purchased under the FHA Facility, subject to the limitations set forth in
paragraph 3 below (the "GNMA FACILITY"; the FHA Facility and the GNMA Facility,
collectively, the "FACILITY"), in the case of (i) and (ii) above, under the
circumstances, and pursuant to the terms and conditions, set forth below.
1. OPERATIVE AGREEMENTS
Reference is made to (i) the Committed Master Repurchase Agreement Governing
Purchases and Sales of Participation Certificates to be entered into by GACC and
Customer relating to the purchase and sale of FHA Mortgage Loans, (ii) the
Committed Master Repurchase Agreement to be entered into by GACC and Customer
relating to the purchase and sale of GNMA Securities, (iii) the Tri-Party
Custody Agreement to be entered into by GACC, CRICO Mortgage Company, Inc., and
Bank of New York (the "CUSTODIAN") relating to certain mortgage loan files, and
(iv) the Custodial Agreement to be entered into by GACC and the Custodian
relating to certain participation certificates, each to have such terms as the
<PAGE>
related parties shall mutually agree and to be dated no later than January 23,
1995. Such agreements, as amended from time to time, are collectively referred
to herein as the "FACILITY AGREEMENTS". As used herein, "FHA MORTGAGE LOANS"
refers to first or second lien mortgage loans on multifamily projects insured by
the Federal Housing Authority; "GNMA SECURITIES" refers to mortgage-backed
securities guaranteed by the Government National Mortgage Association; "MORTGAGE
LOANS" refers to either FHA Mortgage Loans or GNMA Securities; and "TRANSACTION"
refers to each purchase by GACC of Mortgage Loans under the Facility.
Capitalized terms not defined herein shall have the respective meanings given or
incorporated by reference in the Facility Agreements.
In the event of a conflict between the terms of this Commitment Letter and the
terms of the Facility Agreements, the terms of this Commitment Letter shall
control (except with respect to defined terms used herein but defined in the
Facility Agreement), including, without limitation, that provision of this
Commitment Letter that relates to the existence of a commitment to purchase
under the Facility Agreements.
Any portion of the then current amount available under the Facility will be
available to Customer on a committed basis, subject to Customer's obligation to
maintain the Minimum Balance (as defined below) under this Commitment Letter and
the Facility Agreements. Customer must give GACC at least two business days'
notice prior to requesting the commencement of a Transaction (the "NOTICE
DATE"). GACC shall deliver to Customer a Confirmation in the applicable form
provided for by the Facility Agreements and any other documents required by the
Facility Agreements.
2. COMMENCEMENT; CONSIDERATION; MINIMUM LEVEL
The Facility shall commence no later than January 31, 1995. On or prior to
commencement of the Facility, Customer shall deliver to GACC the legal opinions
and other documentation required by the Facility Agreements. As consideration
for the availability of the Facility, Customer agrees to maintain the Facility
at a minimum balance of $150,000,000 (the "MINIMUM BALANCE"). Failure to
maintain the Minimum Balance shall constitute an Event of Default under the
Facility Agreements. It is intended that the Customer shall borrow an aggregate
amount at least equal to $175,000,000 on or before January 31, 1995.
In consideration for the commitment to provide the Facility, Customer shall pay
GACC a commitment fee (the "Commitment Fee") in the amount of 0.125% per year
(pro rated for the period of time commencing on January 23, 1995 and ending on
April 1, 1996) of the unutilized portion of $300,000,000,, payable upon
execution of this Commitment Letter assuming an unutilized portion of
$124,000,000.
On the 90th (the "FIRST REFUND DATE") and 180th (the "SECOND REFUND DATE,"
together with the First Refund Date, the "REFUND DATES") day, respectively, or
if either such day is not a business day, the next succeeding business day from
the date of execution of this Commitment Letter, GACC shall rebate to the
Customer a portion of the Commitment Fee equal to 0.0625% per annum pro rated
for the 90 day period preceding the Refund Date (the "REFUND PERCENTAGE")
multiplied by the average balance of the utilized portion of the Facility over
such 90 day period (the "UTILIZED AMOUNT"),. In addition to the foregoing, on
the Second Refund Date, GACC shall rebate to the Customer a portion of the
Commitment Fee (the "ADDITIONAL REFUNDED AMOUNT") equal to the Refund Percentage
(pro rated for the period
<PAGE>
following such Second Refund Date until the termination of the Committed Period
(the "FACILITY TERMINATION DATE")) multiplied by the balance outstanding under
the Facility on such Second Refund Date.. .
Every 90 days (or portion thereof with respect to the period terminating at the
Facility Termination Date) following the Second Refund Date (each such date, an
"ADJUSTMENT DATE"), GACC shall calculate the amount of the Refund Percentage
(pro rated for the period covered by such Adjustment Date) multiplied by the
Utilized Amount on such Adjustment Date (the "ADJUSTED REBATE AMOUNT"), and in
the event that such Adjusted Rebate Amount is less than the Additional Refunded
Amount (applicable to the period covered by such Adjustment Date), then the
Customer shall promptly pay to GACC the difference between such amounts.
In the event of a termination of the Facility resulting from the occurrence of
an Event of Default by the Customer, (i) GACC shall have no obligation to pay
any rebates required by this paragraph 2, and (ii) Customer shall pay GACC the
portion of the Additional Refunded Amount which relates to the pro rata period
from the date of such termination through April 1, 1996. In the event of a
termination of the Facility resulting from the occurrence of an Event of Default
by GACC, GACC shall rebate to the Customer the portion of one half of the
Commitment Fee which relates to the pro rata period from the date of termination
through April 1, 1996.
<PAGE>
3. COLLATERAL; MARGIN; SUBSTITUTION
No more than 60% of the Mortgage Loans shall be FHA Loans; correlatively, at
least 40% of the Mortgage Loans shall be GNMA Securities; PROVIDED THAT,
notwithstanding the foregoing, for the first 90 days of the Facility, (i) no
more than 66% of the Mortgage Loans shall be FHA Loans and (ii) correlatively,
at least 34% of the Mortgage Loans shall be GNMA Securities. Customer will
notify GACC at least 3 days in advance of changes which increase the percentage
of Mortgage Loans which are FHA Mortgage Loans by more than 5%. The margin
requirement for FHA Mortgage Loans is 105%; the margin requirement for GNMA
Securities is 105%.
Substitution of Mortgage Loans will be permitted only in accordance with the
Facility Agreements.
It is contemplated that certain of the FHA Mortgage Loans may be converted to
GNMA Securities. Upon any such conversion, the converted FHA Mortgage Loan
shall be made subject to the GNMA Facility.
4. PRICING RATES; PAY DOWNS
The Pricing Rate for each Transaction will be set on the Notice Date. The per
annum Pricing Rate for FHA Mortgage Loans will equal one-month, three-month or
six-month LIBOR (as selected at the outset of the Facility, the "FHA SELECTED
LIBOR RATE") plus 75 basis points; thereafter the Pricing Rate for FHA Mortgage
Loans will equal the FHA Selected LIBOR Rate plus 75 basis points, reset on the
date such original FHA Selected LIBOR Rate period expires (each such date, an
"FHA RESET DATE"). The per annum Pricing Rate for GNMA Securities will equal
one-month, three-month or six-month LIBOR (as selected at the outset of the
Facility, the "GNMA SELECTED LIBOR RATE") for such period plus 50 basis points;
thereafter the Pricing Rate for GNMA Securities will equal the GNMA Selected
LIBOR Rate plus 50 basis points, reset on the date such original GNMA Selected
LIBOR Rate period expires (each such date, a "GNMA RESET DATE"), PROVIDED,
HOWEVER, in all cases, the Pricing Rate for GNMA Securities shall be increased
by five (5) basis points for any period during which the Average Market Value is
less than $3,000,000. The Customer shall have the right to repurchase all (but
not a portion) of the Mortgage Loans sold (i) pursuant to any individual
Transaction under the FHA Facility on any applicable FHA Reset Date and (ii)
pursuant to any individual Transaction under the GNMA Facility on any applicable
GNMA Reset Date. "LIBOR" is the London interbank offered rate quotation for
deposits as quoted on page 5 of Telerate, PROVIDED, HOWEVER, that "LIBOR" shall
not be less than the offered rate quotation for one week deposits as quoted on
page 5 of Telerate. Upon expiration of each calendar quarter, accrued interest
shall be paid by Customer in arrears. Quarterly pricing for the next succeeding
calendar quarter shall be based upon LIBOR determined as of 2 business days
prior to the quarterly reset date.
5. TERMINATION; RENEWAL; DEFAULT
(a) The Facility shall remain in effect until April 1, 1996 (the "COMMITTED
PERIOD") (unless either renewed or terminated earlier as provided below);
provided, however, solely at the option of GACC, on April 2, 1995, GACC may
terminate the Facility and enter into facility agreements with Customer for a
term of 364 days.
<PAGE>
(b) Within six (6) months prior to the expiration of the Committed Period, GACC
will provide notice to Customer of the renewal of the Facility, if applicable.
(c) GACC may terminate the Facility upon the occurrence of an Event of Default
(as defined in the Facility Agreements) which is not cured by Customer under the
Facility Agreements within the related cure period set forth therein by giving
notice to Customer of such termination. GACC may also terminate the Facility if
Customer breaches its obligations under this Commitment Letter. Any Event of
Default under one Facility shall constitute an Event of Default under the other
Facility.
6. FEES AND EXPENSES; NEGOTIATION
Customer will pay all legal fees and expenses of the Customer and GACC,
including fees and expenses of accountants, attorneys and advisors incurred in
connection with this letter, the contemplated transactions and the negotiation,
execution and consummation of the definitive documentation, provided, however,
the legal fees and expenses of GACC which the Customer shall pay shall be capped
at $10,000. All fees and expenses incurred pursuant to or in connection with
(i) the Tri-Party Custody Agreement and (ii) the Custodial Agreement, referred
to in paragraph 1 hereof, shall be borne by GACC. Consummation of the
transaction described in this Commitment Letter is subject to negotiation of
mutually satisfactory documents and to compliance with all applicable laws and
regulatory requirements.
7. SURVIVAL
This Commitment Letter shall survive each Purchase Date, shall be
independently enforceable by the parties hereto and the parties hereto shall
continue to remain liable hereunder.
<PAGE>
Kindly acknowledge your agreement to the terms and conditions of this letter by
signing and promptly returning the enclosed duplicate of this letter to Mr. John
Cutting on or before 5 P.M. on January 19, 1995. Your failure to return a
countersigned duplicate of this letter to us within the time indicated shall
give us the right, at our sole option, to declare the commitment confirmed
hereby null and void.
Very truly yours,
GERMAN AMERICAN CAPITAL CORPORATION
By: /s/ Charlene S. Chai
------------------------------
Name: Charlene S. Chai
Title: Vice President
By: /s/ John H. Cutting
------------------------------
Name: John H. Cutting
Title: Director
Agreed and Accepted:
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
------------------------------
Name: Jay R. Cohen
Title: Executive Vice President
Date: January 20, 1995
<PAGE>
Exhibit 4(ii)
<PAGE>
COMMITTED MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF PARTICIPATION CERTIFICATES
Dated as of January 23, 1995
Between:
GERMAN AMERICAN CAPITAL CORPORATION, AS BUYER
and
CRIIMI MAE INC., AS SELLER
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in which
CRIIMI MAE Inc. ("SELLER"), agrees to transfer to German American Capital
Corporation ("BUYER") Participation Certificates against the transfer of
funds by Buyer, with a simultaneous agreement by Buyer to transfer to
Seller such Participation Certificates at a date certain until April 1,
1996 or on demand, as specified in the Confirmation, against the transfer
of funds by Seller, PROVIDED, HOWEVER, that Buyer may, in its sole
discretion, elect to terminate this Agreement and all outstanding
Transactions hereunder on April 2, 1995, PROVIDED FURTHER, HOWEVER, that
if Buyer so elects, it shall, following such termination, enter into a
Committed Master Repurchase Agreement Governing Purchases and Sales of
Participation Certificates for a period of 364 days following the date of
such termination. Each such transaction shall be referred to herein as a
"TRANSACTION" and shall be governed by this Agreement and the related
Confirmation, unless otherwise agreed in writing.
2. DEFINITIONS
"ACT OF INSOLVENCY" means, with respect to any party, (i) and its
Affiliates, the filing of a petition, commencing, or authorizing the
commencement of any case or proceeding under any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar law relating to the
protection of creditors, or suffering any such petition or proceeding to be
commenced by another which is consented to, not timely contested or results
in entry of an order for relief; (ii) seeking the appointment of a
receiver, trustee, custodian or
<PAGE>
similar official for such party or an Affiliate or any substantial part of
the property of either, (iii) the appointment of a receiver, conservator,
or manager for such party or an Affiliate by any governmental agency or
authority having the jurisdiction to do so; (iv) the making or offering by
such party or an Affiliate of a composition with its creditors or a general
assignment for the benefit of creditors, (v) the admission by such party or
an Affiliate of such party's or such Affiliate's inability to pay its debts
or discharge its obligations as they become due or mature; or (vi) any
governmental authority or agency or any person, agency or entity acting or
purporting to act under governmental authority shall have taken any action
to condemn, seize or appropriate, or to assume custody or control of, all
or any substantial part of the property of such party or of any of its
Affiliates, or shall have taken any action to displace the management of
such party or of any of its Affiliates or to curtail its authority in the
conduct of the business of such party or of any of its Affiliates.
"ADDITIONAL COLLATERAL" means Participation Certificates or cash provided
by Seller to Buyer or its designee pursuant to Section 4(a).
"AFFILIATE" means an affiliate of a party as such term is defined in the
United States Bankruptcy Code in effect from time to time.
"AGREEMENT" means this Committed Master Repurchase Agreement Governing
Purchases and Sales of Participation Certificates, as amended from time to
time.
"BUSINESS DAY" means a day other than (i) a Saturday or Sunday, or (ii) a
day in which the New York Stock Exchange, the Custodian or the banks in the
State of Maryland are authorized or obligated by law or executive order to
be closed.
"BUYER" has the meaning specified in Section 1.
"COLLATERAL" has the meaning specified in Section 6.
"COLLATERAL AMOUNT" means, with respect to any Transaction, the amount
obtained by application of the Collateral Amount Percentage to the
Repurchase Price for such Transaction.
"COLLATERAL AMOUNT PERCENTAGE" means the amount set forth in the
Confirmation.
"COLLATERAL DEFICIT" has the meaning specified in Section 4(a).
"COLLATERAL EXCESS" has the meaning specified in Section 4(b).
"COMMITMENT LETTER" means that certain commitment letter, dated as of
January 19, 1995, from Buyer to Seller.
"CONFIRMATION" has the meaning specified in Section 3(c).
<PAGE>
"CONVERTED PC" means the pooling of one or more Underlying Mortgage Loans
for the purpose of the issuance of a mortgage backed security guaranteed by
GNMA.
"CUSTODIAL AGREEMENT" means that certain custodial agreement, dated as of
January 23, 1995, by and between, Buyer and The Bank of New York.
"CUSTODIAL DELIVERY" means the form executed by the Seller in order to
deliver the Original PCs to the Custodian pursuant to Section 7(d), a form
of which is attached hereto as Exhibit II.
"CUSTODIAN" means The Bank of New York, as custodian under the Custodial
Agreement, or its successor in interest or assigns.
"EVENT OF DEFAULT" has the meaning specified in Section 13.
"EXCHANGED PCS" means any Participation Certificates that are exchanged for
one or more Purchased PCs that represent beneficial interests in Underlying
Mortgage Loans that are construction loans in accordance with Section 9(c)
hereof.
"FACILITY AMOUNT" means $180,000,000 (one hundred eighty million dollars)
or such amount as agreed by Buyer and Seller, provided, however the
Facility Amount shall be $198,000,000 (one hundred ninety-eight million
dollars) for the first 90 days after the date hereof.
"FHA" means the Federal Housing Administration, an agency within HUD.
"GAAP" means Generally Accepted Accounting Principles.
"GACC" means German American Capital Corporation.
"GNMA" means the Government National Mortgage Association.
"GNMA REPURCHASE AGREEMENT" means that certain Committed Master Repurchase
Agreement, dated as of January 23, 1995, by and among German American
Capital Corporation, and Seller.
"HUD" means the United States Department of Housing and Urban Development.
"INCOME" means, with respect to any Underlying Mortgage Loan at any time,
any principal thereof then payable and all interest, dividends or other
distributions payable thereon.
"LATE PAYMENT FEE" has the meaning specified in Section 5(b).
<PAGE>
"MARKET VALUE" means as of any date with respect to any Purchased PC, the
price at which such Purchased PC could readily be sold as determined in
good faith by Buyer PROVIDED, HOWEVER, that in making such determination,
Buyer shall not take into account (i) any Underlying Mortgage Loan that has
been delinquent for at least ninety (90) days and for which all delinquent
payments shall not have been advanced by the related Servicer or (ii) any
Purchased PC with respect to which there is a breach of a representation,
warranty or covenant made by Seller in this Agreement or the Custodial
Agreement that materially adversely affects Buyer's interest in such
Purchased PC and which breach has not been cured PROVIDED FURTHER, HOWEVER,
that if Seller timely notifies Buyer in writing that it reasonably believes
that the price determined in good faith by Buyer does not adequately
reflect the price at which a Purchased PC could readily be sold, the
"Market Value" of such Purchased PC shall be the average of the price
determined by Buyer and two (2) written bids obtained by Seller, and timely
delivered to Buyer, from two (2) of the secondary market participants set
forth in Exhibit III attached hereto or any New York based affiliate of
such participants, provided that Seller shall first contact Bear, Stearns &
Co. and CS First Boston Corporation.
"MAXIMUM FHA REPURCHASE AGREEMENT AMOUNT" means an amount not (i) greater
than sixty-six percent (66%) for the first 90 days after the date hereof
and (ii) greater than sixty percent (60%) thereafter of the then aggregate
outstanding purchase price under this Agreement and the GNMA Repurchase
Agreement, PROVIDED FURTHER, HOWEVER, that the "Maximum FHA Repurchase
Agreement Amount" may be reduced or increased upon Seller's request and
with consent of Buyer, in its sole discretion.
"MINIMUM BALANCE" means the amount set forth in the Commitment Letter.
"MORTGAGE" means a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first or second lien on or
first or second priority ownership interest in a fee or leasehold estate in
real property and the improvements thereon, securing a mortgage note or
similar evidence of indebtedness.
"MORTGAGE FILE CUSTODIAN" means The Bank of New York, as custodian under
the Tri-party Custodial Agreement, or its successor in interest or assigns.
"MORTGAGE NOTE" means a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage.
"MORTGAGED PROPERTY" means the real property securing repayment of the debt
evidenced by a Mortgage Note.
"MORTGAGEE" means the record holder of a Mortgage Note secured by a
Mortgage.
"MORTGAGOR" means the obliger on a Mortgage Note and the grantor of the
related Mortgage.
<PAGE>
"ORIGINAL PC" means with respect to each Participation Certificate, an
original participation certificate issued in the name of Seller, together
with a document of assignment thereof, executed in blank.
"PARTICIPATION CERTIFICATE" means a certificate evidencing that Seller is
the registered owner of a (i) 100% undivided participating beneficial
interest or (ii) certificate which is one of only two certificates which in
the aggregate represent a 100% beneficial interest and the other
certificate is owned by the originator of such interest, in each case in
FHA-insured project mortgage loans pooled by the originator of such
certificate.
"PARTICIPATION CERTIFICATE SCHEDULE" means a schedule of Purchased PCs
attached to each Confirmation and Custodial Delivery, setting forth the
following information with respect to each Underlying Mortgage Loan: (i)
the project name; (ii) the street address of the Mortgaged Property; (iii)
FHA project number; (iv) the Mortgagor; (v) the Mortgagee; (vi) the
original principal amount of the Mortgage; (vii) note interest rate; (viii)
servicing fee rate; and (ix) the principal balance of the Underlying
Mortgage Loan as of the close of business on the Purchase Date, after
deduction of payments of principal due on or before the Purchase Date,
whether or not collected. With respect to the Underlying Mortgage Loans in
the aggregate, the Participation Certificate Schedule shall set forth the
following information, as of the Purchase Date: (i) the number of
Underlying Mortgage Loans; (ii) the current aggregate outstanding principal
balance of the Underlying Mortgage Loans; (iii) the weighted average
interest rate of the Underlying Mortgage Loans; and (iv) the weighted
average remaining term to maturity of the Underlying Mortgage Loan.
"PAYMENT DATE" has the meaning specified in Section 5(b).
"PC MORTGAGE FILE" has the meaning specified in Annex A.
"PERIODIC PAYMENT" has the meaning specified in Section 5(b).
"PRICE DIFFERENTIAL" means, with respect to any Transaction hereunder as of
any date, the aggregate amount obtained by daily application of the Pricing
Rate for such Transaction to the Purchase Price for such Transaction on a
360 day per year basis for the actual number of days during the period
commencing on (and including) the Purchase Date for such Transaction and
ending on (but excluding) the Repurchase Date (reduced by any amount of
such Price Differential previously paid by Seller to Buyer pursuant to
Section 5(b) with respect to such Transaction).
"PRICING RATE" means the per annum percentage rate specified in the
Confirmation for determination of the Price Differential.
"PRIME RATE" means the rate of interest published by THE WALL STREET
JOURNAL, northeast edition, as the "prime rate".
<PAGE>
"PURCHASE DATE" means the date on which Purchased PCs are transferred by
Seller to Buyer as specified in the Confirmation.
"PURCHASE PRICE" means (i) on the Purchase Date, the price at which
Purchased PCs are transferred by Seller to Buyer, and (ii) thereafter, such
price decreased by the amount of any cash transferred by Seller to Buyer
pursuant to Section 5, excluding any Late Payment Fees.
"PURCHASED PCS" means the Participation Certificates sold by Seller to
Buyer in a Transaction, any Additional Collateral, any Substituted PCs and
any Exchanged PCs.
"REGISTRATION LETTER" has the meaning and contents as specified in Section
7(e) and Section 12(g).
"REPLACEMENT ASSETS" has the meaning specified in Section 14(b)(ii).
"REPURCHASE DATE" means the date on which Seller is to repurchase the
Purchased PCs from Buyer, as specified in the Confirmation, unless (i) the
Transaction is terminable on demand, in which case "Repurchase Date" shall
be the date on which such Transaction is terminated or (ii) the Seller
notifies the Buyer of its intent to repurchase on a Reset Date and
satisfies the requirements set forth in Section 3(f) hereof, in which case
"Repurchase Date" shall be the Reset Date set forth in such notice.
"REPURCHASE PRICE" means the price at which Purchased PCs are to be
transferred from Buyer to Seller upon termination of a Transaction, which
will be determined in each case (including Transactions terminable upon
demand) as the sum of the Purchase Price and the Price Differential as of
the date of such determination.
"RESET DATE" means the FHA Reset Date set forth in the Commitment Letter as
determined by the selected Pricing Rate.
"SELLER" has the meaning specified in Section 1.
"SERVICER" means any servicer of the Underlying Mortgage Loans.
"SERVICING AGREEMENT" means the agreement pursuant to which (i) the
Participation Certificate was issued, and (ii) the Servicer services the
Underlying Mortgage Loan.
"SERVICING RECORDS" means all servicing agreements, files, documents,
records, databases, computer tapes, copies of computer tapes, proof of
insurance coverage, insurance policies, appraisals, other closing
documentation, payment history records and any other records relating to or
evidencing the servicing of the Underlying Mortgage Loans.
<PAGE>
"SUBSTITUTED PCS" means any Participation Certificates substituted for
Purchased PCs in accordance with Section 9(a) hereof.
"TRANSACTION" has the meaning specified in Section 1.
"TRI-PARTY CUSTODIAL AGREEMENT" means that certain tri-party custodial
agreement, dated as of January 23, 1995, by and among, Buyer, CRICO
Mortgage Company, Inc., and The Bank of New York.
"UNDERLYING MORTGAGE LOANS" means FHA-insured project mortgage loans
represented by and underlying each Purchased PC.
3. INITIATION; CONFIRMATION; TERMINATION
(a) Simultaneous with the execution and delivery of this Agreement by
Seller, Seller shall deliver to Buyer an opinion of counsel that this
Agreement is a legal, valid and binding agreement, enforceable in
accordance with its terms, subject to bankruptcy and insolvency, and that
the Agreement does not and will not impact or adversely affect Seller's
status as a "real estate investment trust."
(b) It is the intent of Buyer and Seller that this Agreement be a
committed facility, and that, subject to the terms and conditions of this
Agreement, Buyer shall be obligated to purchase Participation Certificates
upon Seller's advice of such Transaction as described in Section 3(c),
PROVIDED, HOWEVER, that unless and until notified by Buyer in writing the
aggregate Purchase Price of all Purchased PCs for all Transactions not then
terminated shall not exceed the Maximum FHA Repurchase Agreement Amount.
(c) Seller shall advise Buyer of each Transaction at least two (2)
Business Days before the Purchase Date for such Transaction. Upon
receiving such notice, Buyer shall promptly deliver to Seller and Custodian
a written confirmation in the form of Exhibit I attached hereto (a
"CONFIRMATION"). Such Confirmation shall describe the Purchased PCs,
identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the
Purchase Price, (iii) the Repurchase Date, unless the Transaction is to be
terminable on demand, (iv) the Pricing Rate applicable to the Transaction,
and (v) may contain additional terms or conditions not inconsistent with
this Agreement.
(d) Each Confirmation, together with this Agreement, shall be conclusive
evidence of the terms of the Transaction(s) covered thereby unless objected
to in writing by the Seller no more than two (2) Business Days after the
date the Confirmation was received by the Seller or unless a corrected
Confirmation is sent by Buyer. An objection sent by the Seller must state
specifically that the writing is an objection, must specify the
provision(s) being objected to by the Seller, must set forth such
provision(s) in the manner that the Seller believes they should be stated,
and must be received by Buyer no more than two (2) Business Days after the
Confirmation was received by the Seller.
<PAGE>
(e) In the case of Transactions terminable upon demand, such demand shall
be made by Buyer or Seller by telephone or otherwise, no later than 10:00
a.m. on the Business Day prior to the day on which such termination will be
effective.
(f) Seller has the right in its sole discretion to repurchase Purchased
PCs subject to a Transaction on a Reset Date prior to the Repurchase Date
set forth on the applicable Confirmation, provided, Seller (i) must
repurchase all of the Purchased PCs in connection with such Transaction and
(ii) must notify Buyer in writing of such intent no later than five
Business Days prior to the related Reset Date. Such notice shall set forth
the Reset Date, the related Transaction and identify Purchased PCs to be
repurchased on such Reset Date.
(g) On the Repurchase Date, termination of the Transaction will be
effected by transfer to Seller or its designee of the Purchased PCs (and
any Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to
Section 5(a)) against the simultaneous transfer of the Repurchase Price to
an account of Buyer. Seller is obligated to obtain the Original PCs from
the Custodian at Seller's expense on the Repurchase Date.
<PAGE>
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased PCs subject
to all Transactions is less than the aggregate Collateral Amount for all
such Transactions (a "COLLATERAL DEFICIT"), then Buyer may, by written
notice to Seller, require Seller to transfer to the Custodian Participation
Certificates reasonably acceptable to Buyer and/or cash ("ADDITIONAL
COLLATERAL"), so that the cash and aggregate Market Value of the Purchased
PCs, including any such Additional Collateral, will thereupon equal or
exceed the aggregate Collateral Amount.
(b) If at any time the aggregate Market Value of all Purchased PCs subject
to all Transactions exceeds the aggregate Collateral Amount for all such
Transactions (a "COLLATERAL EXCESS"), then Seller may, by written notice to
Buyer, require Buyer in such Transactions to transfer to Seller or its
designee Purchased PCs and/or cash so that the cash and aggregate Market
Value of the Purchased PCs, after deduction of any such Participation
Certificates and/or cash so transferred, will thereupon not exceed the
aggregate Collateral Amount.
(c) Notice required pursuant to subsections (a) or (b) above may be given
by any means of telecopier or telegraphic transmission. A notice for the
payment or delivery in respect of a Collateral Deficit or Collateral
Excess, as the case may be, received before 1:00 p.m. on a Business Day,
local time of the party receiving the notice, must be met not later than
5:00 p.m. (New York time) on the Business Day following the date on which
notice was given. Any notice given on a Business Date after 1:00 p.m.,
local time of the party receiving the notice, shall be met not later than
5:00 p.m., (New York time) on the second Business Day following the date on
which notice was given. The failure of Buyer or Seller, on any one or more
occasions, to exercise its rights under subsections (a) or (b) of this
Section, respectively, shall not change or alter the terms and conditions
to which this Agreement is subject or limit the right of the Buyer or
Seller to do so at a later date. Buyer and Seller agree that a failure or
delay to exercise its rights under subsections (a) or (b) of this Section
shall not limit either party's rights under this Agreement or otherwise
existing by law or in any way create additional rights for the other party.
5. INCOME PAYMENTS
(a) Where a particular Transaction's term extends over an Income payment
date on the Purchased PCs subject to that Transaction such Income shall be
the property of Buyer. Notwithstanding the foregoing, Buyer agrees that
Servicer shall continue to remit Income to Seller unless and until an Event
of Default by the Seller occurs, in which case Buyer may at its election
direct Servicer to hold such Income in a segregated account for and on
behalf of Buyer and/or to remit such Income directly to Buyer.
(b) Notwithstanding that Buyer and Seller intend that the Transactions
hereunder be sales to Buyer of the Purchased PCs, Seller shall pay to Buyer
the accreted value of the
<PAGE>
Price Differential (less any amount of such Price Differential previously
paid by Seller to Buyer)("PERIODIC PAYMENT") on the first Business Day of
each calendar quarter (each, a "PAYMENT DATE"). If Seller fails to make
the Periodic Payment by 5:00 p.m. (New York time) on the Business Day
following the Payment Date, Seller shall be obligated to pay to Buyer (in
addition to, and together with, the Periodic Payment) a late payment fee of
$100 per day (the "LATE PAYMENT FEE") until the Periodic Payment is
received by Buyer.
(c) Buyer shall offset against the Repurchase Price of each such
Transaction all Income and payments actually received by Buyer pursuant to
Sections 5(a) and (b), respectively, excluding any Late Payment Fees paid
pursuant to Section 5(b).
6. SECURITY INTEREST
Buyer and Seller intend that the Transactions hereunder be sales to the
Buyer of the Purchased PCs and not loans from the Buyer to the Seller
secured by the Purchased PCs. However, in order to preserve the Buyer's
rights under this Agreement in the event that a court or other forum
recharacterizes the Transactions hereunder as loans and as security for the
performance by Seller of all of Seller's obligations to Buyer under this
Agreement and the Transactions entered into pursuant to this Agreement,
Seller grants Buyer a first priority security interest in the Purchased
PCs, Servicing Agreements, Servicing Records, insurance relating to the
Purchased PCs, Income, custodial accounts and escrow accounts relating to
the Purchased PCs and any other contract rights, general intangibles and
other assets relating to the Purchased PCs or any interest in the Purchased
PCs, the servicing of the Purchased PCs, and securities backed by or
representing an interest in such Purchased PCs (collectively, the
"COLLATERAL").
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds
hereunder shall be in immediately available funds.
(b) Subject to Section 7(c), on the Purchase Date for each Transaction,
ownership of the Purchased PCs shall be transferred to the Buyer against
the simultaneous transfer of the Purchase Price to an account of Seller
specified in the Confirmation. Seller, simultaneously with the delivery to
the Buyer of the Purchased PCs relating to each Transaction hereby sells,
transfers, conveys and assigns to Buyer without recourse, but subject to
the terms of this Agreement, all the right, title and interest of Seller in
and to the Purchased PCs together with all right, title and interest in and
to the proceeds of any related insurance policies.
(c) Notwithstanding anything to the contrary in this Agreement, Buyer
shall have no obligation to purchase any Participation Certificates on any
Purchase Date if, after such purchase:
<PAGE>
(i) an Event of Default by the Seller will have occurred and be
continuing, or an Event of Default by the Seller would occur with
notice or the passing of time;
(ii) the Repurchase Date for such Transaction would be later than
April 1, 1996; or
(iii) the aggregate Purchase Price of all Purchased PCs for all
Transactions not then terminated would exceed the Facility Amount.
(d) In connection with such sale, transfer, conveyance and assignment, on
or prior to each Purchase Date, the Seller shall deliver or cause to be
delivered and released to the Custodian an Original PC for each of the
Purchased PCs. In addition, with respect to each Purchased PC (i) under
which CRICO Mortgage Company, Inc., the Seller, or any other Affiliate of
the Seller, is the Mortgagee of the Underlying Mortgage Loan, or (ii) which
at any time is serviced by the Seller, or any Affiliate of the Seller, the
Seller shall cause to be delivered and released to the Mortgage File
Custodian, on or before each Purchase Date (or in the event of (ii) above,
on or before the date on which the Seller or any Affiliate of the Seller
begins servicing the applicable Underlying Mortgage Loan), the PC Mortgage
File.
(e) With respect to each Original PC delivered or caused to be delivered
by Seller to the Custodian pursuant to this Agreement, Seller shall execute
irrevocable letters of instructions to each Servicer or Master Servicer of
the Underlying Mortgage Loan, substantially in the form of Exhibit IV
attached hereto (the "Registration Letter"), directing such Servicer or
Master Servicer to continue making all payments of Income directly to
Seller unless otherwise further notified by Buyer that an Event of Default
under this Agreement has occurred, in which case Buyer may instruct such
Servicer and Master Servicer to remit payments of Income to Buyer at the
account so directed by Buyer.
(f) The Original PCs delivered to Custodian shall be maintained in
accordance with the Custodial Agreement. The Seller understands and agrees
that the Custodian shall have no responsibility to the Seller, including
without limitation any responsibility to keep the Seller informed of any
changes in the status of such Original PCs or in the Buyer's instructions
with respect thereto, except as explicitly set forth in the Custodial
Agreement.
(g) The PC Mortgage Files delivered to the Mortgage File Custodian shall
be maintained in accordance with the Tri-party Custodial Agreement.
(h) Any cash held by Buyer or its designee as Additional Collateral shall
be deposited in an interest bearing account. The interest on such cash
shall accrue for the benefit of Seller and shall be held by Buyer or its
designee as Additional Collateral.
<PAGE>
8. HYPOTHECATION OR PLEDGE OF PURCHASED PCS
Title to all Purchased PCs shall pass to Buyer and Buyer shall have free
and unrestricted use of all Purchased PCs. Nothing in this Agreement shall
preclude Buyer from engaging in repurchase transactions with the Purchased
PCs or otherwise pledging, repledging, hypothecating, or rehypothecating
the Purchased PCs, but no such transaction shall relieve Buyer of its
obligations to transfer the Purchased PCs to Seller pursuant to Section 3.
Nothing contained in this Agreement shall obligate Buyer to segregate any
Purchased PCs delivered to Buyer by Seller.
9. SUBSTITUTION; RELEASE
(a) Subject to Section 9(b), Seller may, upon fifteen (15) Business Days
written notice to Buyer, substitute other Participation Certificates for
any Purchased PCs, PROVIDED, HOWEVER, that the fifteen (15) Business Days
written notice requirement shall not apply to any substitution made (i)
with respect to any Purchased PC for which Seller receives written notice
from Servicer that the Underlying Mortgage Loan is in default or will be
prepaid, or (ii) for the purpose of satisfying a Collateral Deficit
pursuant to Section 4(a). Such substitution shall be made by (i) the
transfer to the Custodian of an Original PC, together with the Custodial
Delivery, and (ii) the transfer to Seller or its designee of the Purchased
PCs requested for release. With respect to substituted Participation
Certificates under which CRICO Mortgage Company, Inc., is the Mortgagee of
the Underlying Mortgage Loan, the PC Mortgage File shall be delivered to
the Mortgage File Custodian. After substitution, the substituted
Participation Certificates shall be deemed to be Purchased PCs.
(b) Notwithstanding anything to the contrary in this Agreement, Seller may
not substitute other Participation Certificates for any Purchased PCs if
(i) Buyer does not consent to such substitution, which consent shall not be
unreasonably withheld, (ii) after taking into account such substitution, a
Collateral Deficit were to occur, and (iii) such substitution would impact
or adversely affect Seller's status as a "real estate investment trust."
Upon Buyer's reasonable request, Seller shall deliver to Buyer an opinion
of Arent, Fox, Kintner, Plotkin & Kahn or other nationally recognized tax
counsel that such substitution will not impact or adversely affect Seller's
status as a "real estate investment trust."
(c) Notwithstanding the foregoing, Seller may, upon three (3) Business
Days written notice to Buyer, exchange one or more Purchased PCs that
represent a beneficial interest in Underlying Mortgage Loans which are
construction loans for one Participation Certificate that represents a
beneficial interest in one permanent Underlying Mortgage Loan, provided
that the permanent Underlying Mortgage Loan shall have an outstanding
principal balance at least equal to the sum of the outstanding principal
balances of the construction Underlying Mortgage Loans. Such exchange
shall be made by (i) the transfer to the Custodian of an Original PC for
the permanent Underlying Mortgage Loan, together with the Custodial
Delivery, and (ii) the transfer to Seller or its designee
<PAGE>
of the Purchased PCs requested for exchange. Such exchange shall not
constitute a substitution for purposes of Section 9(a).
(d) Buyer shall, upon five (5) Business Days written notice from Seller,
release a Converted PC from the related Transaction and this Agreement,
PROVIDED, HOWEVER, that Buyer shall not be obligated to release a Converted
PC from the related Transaction and this Agreement, (i) if after taking
into account such release, a Collateral Deficit were to occur, and (ii)
unless Seller is obligated to place the Converted PC into a transaction
under the GNMA Repurchase Agreement. Upon such release, Custodian shall
hold the Converted PC in escrow to facilitate the conversion.
<PAGE>
10. REPRESENTATIONS
(a) Each of Buyer and Seller represents and warrants to the other that (i)
it is duly authorized to execute and deliver this Agreement, to enter into
the Transactions contemplated hereunder and to perform its obligations
hereunder and has taken all necessary action to authorize such execution,
delivery and performance; (ii) it will engage in such Transactions as
principal (or, if agreed in writing in advance of any Transaction by the
other party hereto, as agent for a disclosed principal); (iii) the person
signing this Agreement on its behalf is duly authorized to do so on its
behalf (or on behalf of any such disclosed principal); (iv) no approval,
consent or authorization of the Transactions contemplated by this Agreement
from any federal, state, or local regulatory authority having jurisdiction
over it is required or, if required, such approval, consent or autho-
rization has been or will, prior to the Purchase Date, be obtained; (v) the
execution, delivery, and performance of this Agreement and the Transactions
hereunder will not violate any law, regulation, order, judgment, decree,
ordinance, charter, by-law, or rule applicable to it or its property or
constitute a default (or an event which, with notice or lapse of time, or
both would constitute a default) under or result in a breach of any
agreement or other instrument by which it is bound or by which any of its
assets are affected; (vi) it has received approval and authorization to
enter into this Agreement and each and every Transaction actually entered
into hereunder pursuant to its internal policies and procedures; and (vii)
neither this Agreement nor any Transaction pursuant hereto are entered into
in contemplation of insolvency or with intent to hinder, delay or defraud
any creditor.
(b) The Seller represents and warrants to the Buyer that as of the
Purchase Date for the purchase of any Purchased PCs by the Buyer from the
Seller and as of the date of this Agreement and any Transaction hereunder
and at all times while this Agreement and any Transaction thereunder is in
full force and effect:
(i) ORGANIZATION. The Seller is duly organized, validly existing and in good
standing under the laws and regulations of the state of
Seller's organization and is duly licensed, qualified, and
in good standing in every state where Seller transacts
business and in any state where any Mortgaged Property is
located if the laws of such state require licensing or
qualification in order to conduct business of the type
conducted by the Seller.
(ii) NO LITIGATION. There is no action, suit, proceeding, investigation, or
arbitration pending or threatened against the Seller, which
may result in any material adverse change in the business,
operations, financial condition, properties, or assets of
the Seller, or which may have an adverse effect on the
validity of this Agreement or the Purchased PCs or any
action
<PAGE>
taken or to be taken in connection with the obligations of
the Seller contemplated herein.
(iii) NO BROKER. The Seller has not dealt with any broker, investment
banker, agent, or other person, except for the Buyer, who
may be entitled to any commission or compensation in
connection with the sale of Purchased PCs pursuant to this
Agreement.
(iv) GOOD TITLE TO COLLATERAL. Purchased PCs shall be free and clear of any
lien, encumbrance or impediment to transfer, and the Seller
represents and warrants the foregoing to the Buyer and
represents and warrants that it has good, valid and
marketable title or right to sell and transfer such
Purchased PCs to the Buyer.
(v) UNENCUMBERED ASSETS. Seller shall maintain cash, cash equivalents
(including lines of credit in an amount up to $15,000,000)
and other assets (including the unencumbered common stock of
CRI Liquidating REIT, Inc. owned and held by Seller but
excluding any hedge contracts owned by Seller) deemed
satisfactory in the sole judgment by Buyer (the loan value
of which shall be determined in the sole judgment of Buyer)
equal to at least $5,000,000.
(vi) DELIVERY OF DOCUMENTS. An Original PC and all other documents required
to be delivered under this Agreement and the Custodial
Agreement for each of the Purchased PCs have been delivered
to the Custodian, and with respect to each Purchased PC
under which CRICO Mortgage Company, Inc., is the Mortgagee
of the Underlying Mortgage Loan, the PC Mortgage File has
been delivered to the Mortgage File Custodian.
(vii) SELECTION PROCESS. The Purchased PCs were selected from among the
outstanding participation certificates in the Seller's
portfolio as to which the representations and warranties set
forth in this Agreement could be made and such selection was
not made in a manner so as to affect adversely the interests
of the Buyer.
(c) The Seller further represents and warrants to the Buyer with
respect to each Participation Certificate sold hereunder, as of the
related Purchase Date, and with respect to each Participation
Certificate delivered hereunder as Additional Collateral, Substituted
PCs or Exchanged PCs, as of the date of such delivery, that:
<PAGE>
(i) The information set forth in the Participation Certificate Schedule is
true and correct;
(ii) Seller owns the entire beneficial interest in the Underlying Mortgage
Loan;
(iii) The Participation Certificate is not assigned or pledged except as
provided in this Agreement, and Seller has good and
marketable title thereto and has full right to sell and
assign the Participation Certificate to Buyer free and clear
of any encumbrance, equity, participation interest, lien,
pledge, charge, claim or security interest and has full
right and authority subject to no interest or participation
of, or agreement with, any other party, to sell and assign
the Participation Certificate;
(iv) The terms of each Servicing Agreement have not been impaired, waived,
altered, amended or modified in any respect;
(v) To the best of our knowledge, the Underlying Mortgage Loan is not in
default in the payment of an installment of interest, principal or
escrow deposit required by the Mortgage;
(vi) To the best of our knowledge, the Underlying Mortgage Loan is not
subject to any defect which would prevent recovery in full
or in part against HUD;
(vii) A valid and enforceable policy of title insurance has been issued in
connection with the Underlying Mortgage Loan in an amount
not less than the original principal amount of the Mortgage
and, to the best of our knowledge, such policy is presently
in full force and effect, with no material changes or
modifications made therein subsequent to the final
endorsement of the Note by the FHA, except as may be
approved in writing by HUD;
(viii) To the best of our knowledge, each building or other improvement
located on the Mortgaged Property is insured under customary
property insurance policies against insurance risks and
hazards as required by HUD and such insurance is in amounts
which are not less than the amount necessary to meet FHA
requirements and comply with any co-insurance provision of
the policies, with all premiums for such policies having
been continuously paid as required by the policies or, in
the event of a lapse in payment, such
<PAGE>
lapse and any lapse in insurance coverage relating thereto
shall not prevent recovery in full or in part against HUD;
(ix) To the best of our knowledge, none of the buildings or other
improvements on the Mortgaged Property have been materially
damaged as a result of any fire, explosion, accident, riot,
was, or act of God or the public enemy;
(x) To the best of our knowledge, the escrows for taxes, insurance,
mortgage insurance premiums and replacement reserves
required with respect to the Underlying Mortgage Loan have
been and throughout the term of the related Transaction
shall be maintained in accordance with FHA requirements;
(xi) To the best of our knowledge, the terms of the Underlying Mortgage
Loan have not been impaired, waived, altered or modified in
any respect and no portion of the Mortgaged Property has
been released, except by written instructions approved by
FHA; and
(xii) Neither Seller nor anyone acting on its behalf has offered,
transferred, pledged, sold or otherwise disposed of the
Participation Certificate, any interest in the Participation
Certificate or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other
disposition of the Participation Certificate, any interest
in the Participation Certificate or any other similar
security from or otherwise approached or negotiated with
respect to the Participation, any interest in the
Participation Certificate or any other similar security
with, any person in any manner, or made any general
advertising or in any other manner, or taken any other
action, which would constitute a distribution of the
Participation Certificate under the Securities Act of 1933
or which would render the disposition of the Participation
Certificate a violation of Section 5 of the Securities Act
of 1933 or require registration pursuant thereto, nor will
it act, nor has it authorized or will it authorize any
person to act, in such manner with respect to the
Participation Certificate.
It is understood and agreed that the foregoing representations and warranties
shall survive transfer of the Purchased PCs to the Buyer. In addition to the
foregoing representations and warranties, Seller assigns, conveys and transfers
to Buyer all of the representations and warranties that it received with respect
to Purchased PCs under the related Servicing Agreement.
<PAGE>
(d) On the Purchase Date for any Transaction, Buyer and Seller shall each
be deemed to have made all the foregoing representations, as
applicable, with respect to itself as of such Purchase Date.
<PAGE>
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until
this Agreement is no longer in force with respect to any Transaction, the
Seller covenants that it will not:
(a) take any action which would directly or indirectly impair or adversely
affect the Buyer's title to or the value of the Purchased PCs; or
(b) pledge, assign, convey, grant, bargain, sell, set over, deliver or
otherwise transfer any interest in the Purchased PCs to any person not a
party to this Agreement nor will the Seller create, incur or permit to
exist any lien, encumbrance or security interest in or on the Purchased PCs
except as described in Section 6 of this Agreement.
12. AFFIRMATIVE COVENANTS OF THE SELLER
(a) Seller covenants that it will promptly notify Buyer of any material
adverse change in its business operations and/or financial condition,
PROVIDED, HOWEVER, that nothing in this Section 12 shall relieve Seller of
its obligations pursuant to Section 10(b)(v) or pursuant to any other
Section of this Agreement.
(b) Seller shall provide Buyer with copies of such documentation as Buyer
may reasonably request evidencing the truthfulness of the representations
set forth in Section 10, including but not limited to resolutions
evidencing the approval of this Agreement by Seller's board of directors or
loan committee, and copies of the minutes of the meetings of Seller's board
of directors or loan committee at which this Agreement and the Transactions
contemplated by this Agreement were approved.
(c) Seller shall, at Buyer's request, take all action necessary to ensure
that Buyer will have a first priority security interest in the Purchased
PCs, including, among other things, using its best efforts to obtain the
Servicer's signature (if the Servicer's signature is necessary) and file
such UCC financing statements as Buyer may reasonably request.
(d) Seller covenants that it will not create, incur or permit to exist any
lien, encumbrance or security interest in or on any of the Collateral
without the prior express written consent of Buyer.
(e) Seller shall notify Buyer as soon as possible, but in no event later
than three (3) Business Days after obtaining actual knowledge thereof, if
any event has occurred that constitutes an Event of Default with respect to
Seller or any event that with the giving of notice or lapse of time, or
both, would become an Event of Default with respect to Seller.
(f) Seller shall provide Buyer with a certified copy of each Servicing
Agreement and Seller covenants that it will not amend, modify or waive, nor
consent to any amendment,
<PAGE>
modification or waiver to, any Servicing Agreement without the prior
written consent of Buyer.
(g) Seller shall use its best efforts to assist Buyer in causing the
registration of each Purchased PC purchased by Buyer and pledged by Seller
under this Agreement in the name of GACC, including but not limited to (i)
delivering a Registration Letter, substantially in the form of Exhibit IV
attached hereto, to each Servicer or Master Servicer for each Purchased PC
on or prior to the related Purchase Date and (ii) providing further
information and assistance to such Servicer and/or Master Servicer or GACC,
as necessary, to register the Purchased PCs in the name of GACC. Such
Registration Letter shall instruct each Servicer or Master Servicer unless
and until the Servicer or Master Servicer is notified by GACC that an event
of Default has occurred or is continuing, (i) that the Seller shall retain
all servicing related authority and (ii) to remit payments of principal and
interest to Seller at the account so directed by Seller. Actual costs
associated with the registration of the Purchased PCs shall be borne by
Buyer, provided that Seller shall be responsible for any legal costs
incurred by it in connection therewith. If the Purchased PCs are not
registered in the name of GACC within 45 days after the applicable Purchase
Date, then Purchaser shall repurchase the applicable Purchased PCs within
one Business Day following such 45 day period at the Repurchase Price and a
Repurchase Date shall be deemed to have occurred with respect to the
related Transaction.
<PAGE>
13. EVENTS OF DEFAULT
(a) If any of the following events (each, an "EVENT OF DEFAULT")
occur, the Seller and Buyer shall have the rights set forth in Section
14, as applicable.
(i) Seller or Buyer fails to satisfy or perform any material obligation or
covenant under this Agreement, other than the covenant set forth
in Section 12(b);
(ii) Seller fails to satisfy or perform the covenant set forth in Section
12(b)within thirty (30) days after Buyer gives Seller written
notice of such failure;
(iii) any representation made by Seller or Buyer, other than the representa
tions set forth in Sections 10(b)(v) and 10(c), shall have been
incorrect or untrue in any material respect when made or repeated
or deemed to have been made or repeated;
(iv) Seller fails to cure any breach of the representations set forth in
Sections 10(b)(v) and 10(c) within five (5) days after Buyer
gives Seller written notice of such breach.
(v) an Act of Insolvency occurs with respect to Buyer or Seller;
(vi) Buyer or Seller shall admit its inability to, or its intention not to,
perform any of its obligations hereunder;
(vii) any governmental, regulatory, or self-regulatory authority takes any
action to remove, limit, restrict, suspend or terminate the
rights, privileges, or operations of the Seller or any of its
Affiliates, including suspension as an issuer or lender of
mortgage loans, which suspension has a material adverse effect on
the ordinary business operations of Seller or Seller's Affiliate,
and which continues for more than 24 hours;
(viii) Seller dissolves, merges or consolidates with another entity unless it
is the surviving party, or sells, transfers, or otherwise
disposes of a material portion of its business or assets,
PROVIDED, HOWEVER, that a merger shall not constitute an Event of
Default if Seller obtains the prior written consent of the Buyer;
Buyer dissolves, merges or consolidates with another entity
unless it is the surviving party, or sells, transfers, or
otherwise disposes of a material portion of its business or
assets, PROVIDED, HOWEVER, that such action shall
<PAGE>
not constitute an Event of Default if any surviving entity
legally bound hereunder has the ability to perform the
obligations set forth in this Agreement;
(ix) Buyer, in its good faith judgment, has reasonable cause to believe
that (A) there has been a material adverse change in the
business, operations, corporate structure or financial condition
or prospects of the Seller; (B) Seller will not meet any of its
obligations under any Transaction pursuant to this Agreement, or
any other agreement between the parties; or (C) a material
adverse change in the financial or legal condition of Seller may
occur due to the pendency or threatened pendency of a material
legal action against Seller or any of its Affiliates, and Seller
fails to provide Buyer with adequate assurances (including
without limitation performance guarantees), within 24 hours of a
written request therefor, of its ability to perform its
obligations hereunder or under any other agreement between the
parties;
(x) Except with respect to Seller's obligation under Section 5(b), Seller
or any of its Affiliates shall fail to pay when due (including
any grace period provided under the applicable documents) any
amount in respect of indebtedness for money borrowed or for the
deferred purchase price of property created, issued, guaranteed,
incurred or assumed by any of them, or any other event shall
occur or any condition shall exist in respect of any such
indebtedness the effect of which is to cause (or permit any
holder thereof or a trustee to cause) such indebtedness to become
due prior to its stated maturity;
(xi) Seller shall fail to pay within five (5) Business Days of each Payment
Date any and all amounts payable pursuant to Section 5(b);
(xii) Seller or any of its Affiliates shall default or fail to perform under
any agreement or transaction between Buyer or any of its
Affiliates, or Seller or any of its Affiliates, or Seller or any
of its Affiliates shall breach any covenant or condition in any
agreement or transaction between Buyer or any of its Affiliates
and Seller or any of its Affiliates, PROVIDED, HOWEVER, that any
such default, failure to perform
<PAGE>
or breach shall not constitute an Event of Default if Seller or
any of its Affiliates cures such default, failure to perform or
breach, as the case may be, within the grace period, if any,
provided under the applicable agreement;
(xiii) Seller fails to provide quarterly unaudited and annual audited
financial statements within 50 and 95 days, respectively, after
the date on which such period ends, or fails to deliver in a
timely manner such financial or other information as Buyer may
from time to time reasonably request;
(xiv) Subject to Section 13(a)(xv), Seller's ratio of consolidated total
liabilities (excluding payables in the normal course of business)
to consolidated shareholders' equity (both computed in accordance
with GAAP) exceeds three to one (3 to 1);
(xv) Seller pledges, directly or indirectly, hypothecates or encumbers any of
its assets or engages in repurchase transactions or similar
transactions with any of its assets (excluding (i) assets already
pledged under existing facilities, (ii) any assets required to be
pledged for purposes of collateral maintenance under such
facilities and (iii) subordinated debt securities subject to
master repurchase agreements with financial institutions,
provided that the aggregate indebtedness pursuant to such
repurchase agreements shall not exceed $50,000,000 and provided
that the pledge of any other assets of Seller pursuant to such
repurchase agreements shall not cause an Event of Default
hereunder) before notification to and written approval by Buyer,
which approval shall not be unreasonably withheld;
(xvi) Seller fails to maintain consolidated shareholders equity (computed in
accordance with GAAP) of at least $125,000,000 (one hundred and
twenty five million dollars);
(xvii) Seller incurs three (3) consecutive quarters of consolidated net
losses on either a GAAP or tax basis;
(xviii) Seller fails to maintain interest rate hedges, reasonably acceptable
to Buyer, on at least 75% of its floating rate liabilities;
(xix) Seller fails to promptly certify at Buyer's request that no Event of
Default has occurred or is continuing at the time of the
certification, PROVIDED, HOWEVER, that such certification shall
be made in any event by Seller no later than fifty days following
the end of each calendar quarter for the first three calendar
quarters of the year and no later than ninety-
<PAGE>
five days following the end of the last calendar quarter of the
year;
(xx) A final judgment by any competent court in the United States of
America forthe payment of money in an amount of at least $100,000
is rendered against the Seller, and the same remains undischarged
or unpaid for a period of sixty (60) days during which execution
of such judgment is not effectively stayed;
(xxi) This Agreement shall for any reason cease to create a valid first
priority security interest in any of the Purchased PCs purported
to be covered hereby;
(xxii) Seller fails to maintain the aggregate Purchase Price of all Purchased
PCs for all Transactions not then terminated in an amount less
than or equal to the Maximum FHA Repurchase Agreement Amount; or
(xxiii) Seller fails to maintain the aggregate Purchase Price of all Purchased
PCs and "Purchase Price" (as defined in the GNMA Repurchase
Agreement) of all Purchased Securities (as defined in the GNMA
Repurchase Agreement) for all Transactions not then terminated in
an amount equal to or greater than the Minimum Balance.
(b) In making a determination as to whether an Event of Default has
occurred, the Buyer shall be entitled to rely on reports published or
broadcast by media sources believed by the Buyer to be generally
reliable and on information provided to it by any other sources
believed by it to be generally reliable, provided that the Buyer
reasonably and in good faith believes such information to be accurate
and has taken such steps as may be reasonable in the circumstances to
attempt to verify such information.
<PAGE>
14. REMEDIES
(a) If an Event of Default occurs with respect to the Seller, the
following rights and remedies are available to the Buyer:
(i) At the option of the Buyer, exercised by written notice to the Seller
(which option shall be deemed to have been exercised, even if no
notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder
shall be deemed immediately to occur. Notwithstanding that the
Repurchase Date shall be deemed immediately to have occurred upon
the exercise or deemed exercise of such option by the Buyer, for
purposes of determining the Repurchase Price, the Repurchase Date
shall be the date specified in the Confirmation for such
Transaction.
(ii) If the Buyer exercises or is deemed to have exercised the option
referred to in subsection (a)(i) of this Section,
(A) the Seller's obligations hereunder to repurchase all Purchased PCs in
such Transactions shall thereupon become immediately due and
payable,
(B) to the extent permitted by applicable law, the Repurchase Price with
respect to each such Transaction shall be increased by the
aggregate amount obtained by daily application of, on a 360 day
per year basis for the actual number of days during the period
from and including the date of the exercise or deemed exercise of
such option to but excluding the date of payment of the
Repurchase Price as so increased, (x) the greater of the Prime
Rate or the Pricing Rate for each such Transaction multiplied by
(y) the Repurchase Price for such Transaction (decreased as of
any day by (I) any amounts actually in the possession of Buyer
pursuant to clause (C) of this subsection, (II) any proceeds from
the sale of Purchased PCs applied to the Repurchase Price
pursuant to subsection (a)(ix) of this Section, and (III) any
amounts applied to the Repurchase Price pursuant to subsection
(a)(iii) of this Section), and
(C) all Income and payments actually received by the Buyer pursuant to
Sections 5(a) and (b), excluding any Late Payment Fees paid
pursuant to Section 5(b), shall be applied to the aggregate
unpaid Repurchase Price owed by the Seller.
(iii) After one Business Day's notice to the Seller with respect to an Event
of Default relating to a failure by Seller to make a required
<PAGE>
payment pursuant to this Agreement, or after three Business Day's
notice to Seller in connection with any other Event of Default
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under subsection
(a)(i) of this Section), the Buyer may (A) immediately sell, at a
public or private sale in a commercially reasonable manner and at
such price or prices as the Buyer may reasonably deem
satisfactory any or all Purchased PCs subject to a Transaction
hereunder or (B) in its sole discretion elect, in lieu of selling
all or a portion of such Purchased PCs, to give the Seller credit
for such Purchased PCs in an amount equal to the Market Value of
the Purchased PCs against the aggregate unpaid Repurchase Price
and any other amounts owing by the Seller hereunder. The
proceeds of any disposition of Purchased PCs shall be applied
first to the costs and expenses incurred by the Buyer in
connection with the Seller's default; second to consequential
damages, including but not limited to costs of cover and/or
related hedging transactions, PROVIDED, HOWEVER, that Buyer shall
act in good faith and in a timely manner to mitigate damages to
the extent practicable; third to the Repurchase Price; and fourth
to any other outstanding obligation of the Seller to the Buyer or
its Affiliates.
(iv) The parties recognize that it may not be possible to purchase or sell
all of the Purchased PCs on a particular Business Day, or in a
transaction with the same purchaser, or in the same manner
because the market for such Purchased PCs may not be liquid. In
view of the nature of the Purchased PCs, the parties agree that
liquidation of a Transaction or the underlying Purchased PCs does
not require a public purchase or sale and that a good faith
private purchase or sale shall be deemed to have been made in a
commercially reasonable manner. Accordingly, Buyer may elect, in
its sole discretion, the time and manner of liquidating any
Purchased PC and nothing contained herein shall (A) obligate
Buyer to liquidate any Purchased PC on the occurrence of an Event
of Default or to liquidate all Purchased PCs in the same manner
or on the same Business Day or (B) constitute a waiver of any
right or remedy of Buyer. However, in recognition of the
parties' agreement that the Transactions hereunder have been
entered into in consideration of and in reliance upon the fact
that all Transactions hereunder constitute a single
<PAGE>
business and contractual relationship and that each Transaction
has been entered into in consideration of the other Transactions,
the parties further agree that Buyer shall use its best efforts
to liquidate all Transactions hereunder upon the occurrence of an
Event of Default as quickly as is prudently possible in the
reasonable judgment of Buyer.
(v) Seller agrees that Buyer may obtain an injunction or an order of
specific performance to compel Seller to fulfill its obligations
as set forth in Section 24, if Seller fails or refuses to perform
its obligations as set forth therein.
(vi) Seller shall be liable to Buyer for (A) the amount of all expenses,
including reasonable legal or other expenses incurred by Buyer in
connection with or as a consequence of an Event of Default, and
(B) consequential damages including, without limitation, all
costs incurred in connection with hedging or covering
transactions, PROVIDED, HOWEVER, that Buyer shall act in good
faith and in a timely manner to mitigate damages to the extent
practicable.
(vii) Buyer shall have all the rights and remedies provided herein, provided
by applicable federal, state, foreign, and local laws (including,
without limitation, the rights and remedies of a secured party
under the Uniform Commercial Code of the State of New York, to
the extent that the Uniform Commercial Code is applicable, and
the right to offset any mutual debt and claim), in equity, and
under any other agreement between Buyer and Seller.
(viii) Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and,
except to the extent provided in subsections (a)(i) and (iii) of
this Section, at any time thereafter without notice to Seller.
All rights and remedies arising under this Agreement as amended
from time-to-time hereunder are cumulative and not exclusive of
any other rights or remedies which Buyer may have.
(ix) In addition to its rights hereunder, Buyer shall have the right to proceed
against any assets of Seller which may be in the possession of
Buyer or its designee (including the Custodian), including the
right to liquidate such assets and to set off the proceeds
against monies owed by Seller to Buyer pursuant
<PAGE>
to this Agreement. Buyer may set off cash, the proceeds of the
liquidation of the Purchased PCs, any Collateral or its proceeds,
and all other sums or obligations owed by Seller to Buyer against
all of Seller's obligations to Buyer, whether under this
Agreement, under a Transaction, or under any other agreement
between the parties, or otherwise, whether or not such
obligations are then due, without prejudice to Buyer's right to
recover any deficiency. Any cash, proceeds, or property in
excess of any amounts due, or which Buyer reasonably believes may
become due, to it from Seller shall be returned to Seller after
satisfaction of all obligations of Seller to Buyer.
(x) Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives
any defenses Seller might otherwise have to require Buyer to
enforce its rights by judicial process. Seller also waives any
defense Seller might otherwise have arising from the use of
nonjudicial process, enforcement and sale of all or any portion
of the Collateral, or from any other election of remedies, except
that Seller does not waive any defense it might have that the
Collateral was not sold in a commercially reasonable manner.
Seller recognizes that nonjudicial remedies are consistent with
the usages of the trade, are responsive to commercial necessity
and are the result of a bargain at arm's length.
(b) If an Event of Default occurs with respect to Buyer, the
following rights and remedies are available to the Seller:
(i) Upon tender by the Seller of payment of the aggregate Repurchase Price
for all such Transactions, the Buyer's right, title and interest in
all Purchased PCs subject to such Transactions shall be deemed
transferred to the Seller, and the Buyer shall deliver all such
Purchased PCs to the Seller or its designee at Buyer's expense.
(ii) If the Seller exercises the option referred to in subsection (b)(i) of
this Section and the Buyer fails to deliver the Purchased PCs to
the Seller or its designee, after one Business Day's notice to
the Buyer, the Seller may (A) purchase mortgage loans,
Participation Certificates or securities ("REPLACEMENT ASSETS")
that are as similar as is reasonably practicable in
characteristics, outstanding principal amounts (as a pool) and
interest rate to any Purchased PCs that are not
<PAGE>
delivered by the Buyer to the Seller or its designee as required
hereunder or (B) in its sole discretion elect, in lieu of
purchasing Replacement Assets, to be deemed to have purchased
Replacement Assets at a price therefor on such date, equal to the
Market Value of the Purchased PCs.
(iii) The Buyer shall be liable to the Seller (A) with respect to Purchased
PCs (other than Additional Collateral), for any excess of the
price paid (or deemed paid) by the Seller for Replacement Assets
therefor over the Repurchase Price for such Purchased PCs and (B)
with respect to Additional Collateral, for the price paid (or
deemed paid) by the Seller for the Replacement Assets therefor.
In addition, the Buyer shall be liable to the Seller for interest
on such remaining liability with respect to each such purchase
(or deemed purchase) of Replacement Assets from the date of such
purchase (or deemed purchase) until paid in full by Buyer. Such
interest shall be at the greater of the Pricing Rate or the Prime
Rate.
<PAGE>
15. RECORDING OF COMMUNICATIONS
Buyer and Seller shall have the right (but not the obligation) from time to
time to make or cause to be made tape recordings of communications between
its employees and those of the other party with respect to Transactions,
provided, however, such right to record communications shall be limited to
communications of employees taking place on the trading floor of Buyer
and/or Seller. Buyer and Seller consent to the admissibility of such tape
recordings in any court, arbitration, or other proceedings. The parties
agree that a duly authenticated transcript of such a tape recording shall
be deemed to be a writing conclusively evidencing the parties' agreement.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and that each has been entered into in
consideration of the other Transactions. Accordingly, each of Buyer and
Seller agrees (i) to perform all of its obligations in respect of each
Transaction hereunder, and that a default in the performance of any such
obligations shall constitute a default by it in respect of all Transactions
hereunder, (ii) that each of them shall be entitled to set off claims and
apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries, and other transfers made by either of
them in respect of any Transaction shall be deemed to have been made in
consideration of payments, deliveries, and other transfers in respect of
any other Transactions hereunder, and the obligations to make any such
payments, deliveries, and other transfers may be applied against each other
and netted.
17. NOTICES AND OTHER COMMUNICATIONS
(a) Unless another address is specified in writing by the respective party
to whom any written notice or other communication is to be given hereunder,
all such notices or communications shall be in writing or confirmed in
writing and delivered at the respective addresses set forth in the
Confirmation, except as provided in Section 4(c). All demands, notices and
communications hereunder shall be deemed to have been duly given if mailed,
by overnight courier, registered or certified mail, return receipt
requested, or, if by other means, when received by the other party. Any
such demand, notice or communication hereunder shall be deemed to have been
received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by
the date noted on the return receipt).
(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person set forth in
Exhibit V hereto, and the Seller shall indemnify Buyer, defend, and hold
Buyer harmless from and against any and all liabilities, losses,
<PAGE>
damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from the Seller.
From time to time, Seller may, by delivering to Buyer a revised exhibit,
change the information previously given pursuant to this Section, but the
Buyer shall be entitled to rely conclusively on the current exhibit until
receipt of the superseding exhibit.
<PAGE>
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the Commitment Letter and the applicable
Confirmation constitutes the entire understanding between Buyer and Seller
with respect to the subject matter it covers and shall supersede any
existing agreements between the parties containing general terms and
conditions for repurchase transactions involving Purchased PCs. By
acceptance of this Agreement, Buyer and Seller acknowledge that they have
not made, and are not relying upon, any statements, representations,
promises or undertakings not contained in this Agreement. Each provision
and agreement herein shall be treated as separate and independent from any
other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or
agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior
written consent of the other party, PROVIDED, HOWEVER, that Buyer may
assign its rights and obligations under this Agreement and/or under any
Transaction to an Affiliate that is subject to Deutsche Bank AG's
"declaration of backing", without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any Transactions shall
be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Nothing in this Agreement express or
implied, shall give to any person, other than the parties to this Agreement
and their successors hereunder, any benefit or any legal or equitable
right, power, remedy or claim under this Agreement.
20. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
21. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York, the
parties irrevocably waiving any objection thereto. If, for any reason,
federal jurisdiction is not available, and only if federal jurisdiction is
not available, the parties irrevocably agree to submit to the personal
jurisdiction of the Supreme Court of the State of New York, the parties
irrevocably waiving any objection thereto. Notwithstanding the foregoing
two sentences, at either party's sole option exercisable at any time not
later than thirty (30) days after an action or proceeding has been
commenced, the parties agree that the matter may be submitted to binding
arbitration in accordance with the commercial rules of the American
Arbitration Association then in effect in the State of New York and
judgment upon any award rendered by the arbitrator may be entered in any
court having jurisdiction thereof
<PAGE>
within the City, County and State of New York, PROVIDED, HOWEVER, that the
arbitrator shall not amend, supplement, or reform in any regard this
Agreement or the terms of any Confirmation, the rights or obligations of
any party hereunder or thereunder, or the enforceability of any of the
terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase
transactions and the secondary mortgage market in the City, County, and
State of New York.
22. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any
provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and
duly executed by both of the parties hereto. Any such waiver or
modification shall be effective only in the specific instance and for the
specific purpose for which it was given.
<PAGE>
23. INTENT
The parties understand and intend that this Agreement and each Transaction
hereunder constitute a "securities contract" as that term is defined in
Section 741(7) of Title 11 of the United States Code, as amended.
24. SERVICING
(a) Seller covenants to maintain or cause the servicing of the Underlying
Mortgage Loans to be maintained in conformity with accepted servicing
practices in the industry and in a manner at least equal in quality to the
servicing Seller requires for mortgage loans which it owns. All servicing
fees and compensation with respect to the servicing of the Underlying
Mortgage Loans shall be customary, reasonable and consistent with industry
practice. All servicing fees and compensation with respect to the
servicing of the Underlying Mortgage Loans shall be paid in accordance with
the terms of the Servicing Agreements.
(b) Seller hereby irrevocably assigns to the Buyer and Buyer's successors
and assigns all right, title, interest and the benefits of the Servicing
Agreements with respect to the Purchased PCs. Accordingly, Seller shall
provide Buyer with the notices to the applicable Servicers and Master
Servicers required in accordance with the terms of the Servicing Agreements
consistent with Exhibit IV hereto sufficient to transfer Seller's ownership
interest in the Purchased PCs to the Buyer.
25. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case of
Transactions in which one of the parties is an "insured depository
institution" as that term is defined in Section 1831(a) of Title 12 of the
United States Code, as amended, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and therefore are not
insured by the Federal Deposit Insurance Corporation, the Savings
Association Insurance Fund or the Bank Insurance Fund, as applicable.
26. NETTING
If Buyer and Seller are "financial institutions" as now or hereinafter
defined in Section 4402 of Title 12 of the United States Code ("SECTION
4402") and any rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on behalf of the
other under this Agreement or any Transaction hereunder shall be deemed to
be "payment obligations" and all amounts to be received by or on behalf of
one party from the other under this Agreement or any Transaction hereunder
shall be deemed to be "payment entitlements" within the meaning of Section
4402, and this Agreement shall be deemed to be a "netting contract" as
defined in Section 4402.
<PAGE>
(b) The payment obligations and the payment entitlements of the parties
hereto pursuant to this Agreement and any Transaction hereunder shall be
netted as follows. In the event that either party (the "DEFAULTING PARTY")
shall fail to honor any payment obligation under this Agreement or any
Transaction hereunder, the other party (the "NONDEFAULTING PARTY") shall be
entitled to reduce the amount of any payment to be made by the
Nondefaulting Party to the Defaulting Party by the amount of the payment
obligation that the Defaulting Party failed to honor.
27. MISCELLANEOUS
(a) Time is of the essence under this agreement and all Transactions and
all references to a time shall mean New York time in effect on the date of
the action unless otherwise expressly stated in this Agreement.
(b) If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this
Agreement shall prevail.
(c) If there is any conflict between the terms of a Confirmation or a
corrected Confirmation issued by the Buyer and this Agreement, the
Confirmation shall prevail.
(d) This Agreement may be executed in counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts
shall together constitute but one and the same instrument.
(e) The headings in this Agreement are for convenience of reference only
and shall not affect the interpretation or construction of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.
BUYER
GERMAN AMERICAN CAPITAL
CORPORATION
By: /S/ CHARLENE S. CHAI
-----------------------
Name: Charlene S. Chai
Title: Vice President
By: /s/ John h. Cutting, III
-----------------------
Name: John H. Cutting, III
Title: Director
SELLER
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
-----------------------
Name: Jay R. Cohen
Title: Executive Vice
President
<PAGE>
EXHIBITS
EXHIBIT I Confirmation
EXHIBIT II Form of Custodial Delivery
EXHIBIT III Approved Secondary Market Participants
EXHIBIT IV Letter of Instruction to
Master Servicer and Servicers
EXHIBIT V Authorized Representatives of
Seller
ANNEX
ANNEX A Additional Definitions
-1-
<PAGE>
EXHIBIT I
[Form of Confirmation Letter]
(date)
CRIIMI MAE Inc.
Attention: Jay Cohen, Executive Vice President
11200 Rockville Pike
Rockville, MD 20852
Confirmation No.:
----------------------
Ladies/Gentlemen:
This letter confirms our oral agreement to purchase from you the Participation
Certificates listed in Appendix I hereto, pursuant to the Committed Master
Repurchase Agreement Governing the Purchases and Sales of Participation
Certificates between us, dated as of January 23, 1995, (the "Agreement"), as
follows:
Purchase Date:
Participation Certificates
to be Purchased: See Appendix I hereto.
[Appendix I to Confirmation Letter
will list the Participation
Certificates]
Aggregate Principal Amount of Participation Certificates:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Collateral Amount Percentage:
Names and addresses for communications:
Buyer: Administrator, Joyce Landry
German American Capital Corporation
-2-
<PAGE>
31 West 52nd Street
New York, New York 10019
with legal matters to:
Robert O. Link, Jr., Esquire
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Seller: Jay Cohen
Executive Vice President
CRIIMI MAE Inc.
11200 Rockville Pike
Rockville, MD 20852
An Original PC for each Participation Certificate listed on Appendix I
hereto must be delivered to the Custodian on or before the Purchase Date. In
addition, with respect to each Participation Certificate listed on Appendix I
hereto under which CRICO Mortgage Company, Inc., is the Mortgagee of the
Underlying Mortgage Loan, the related PC Mortgage File must be delivered to the
Mortgage File Custodian on or before the Purchase Date. Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Agreement.
GERMAN AMERICAN
CAPITAL CORPORATION
By:
Name:
Title:
Agreed and Acknowledged:
CRIIMI MAE INC.
By:
Name:
Title:
-3-
<PAGE>
EXHIBIT II
Form of Custodial Delivery
On this __________ day of ______________, 19___, CRIIMI MAE Inc. (the
"Seller"), as the Seller under that certain Committed Master Repurchase
Agreement Governing Purchases and Sales of Participation Certificates, dated as
of December , 1994 (the "Repurchase Agreement") between the Seller and German
American Capital Corporation (the "Buyer"), does hereby deliver to The Bank of
New York (the "Custodian"), as custodian under that certain Custodial Agreement,
dated as of January 23, 1995, between Buyer and Custodian, an Original PC with
respect to each Participation Certificate listed on the Participation
Certificate Schedule attached hereto. With respect to each Participation
Certificate listed on the Participation Certificate Schedule attached hereto
under which CRICO Mortgage Company, Inc., is the Mortgagee for the Underlying
Mortgage Loan, Seller has caused the PC Mortgage File to be delivered to the
Mortgage File Custodian. [The Participation Certificates listed on the
Participation Certificate Schedule attached hereto will be purchased by the
Buyer pursuant to the Repurchase Agreement][The Participation Certificates
listed on the Participation Certificate Schedule attached hereto constitute
Additional Collateral delivered pursuant to Section 4(a) of the Repurchase
Agreement][The Participation Certificates listed on the Participation
Certificate Schedule attached hereto constitute Substituted PCs delivered
pursuant to Section 9(a) of the Repurchase Agreement and are intended to be
substituted for the Purchased PCs listed on Exhibit B attached hereto.][The
Participation Certificates listed on the Participation Certificate Schedule
attached hereto constitute Exchanged PCs delivered pursuant to Section 9(c) of
the Repurchase Agreement and are intended to be substituted for the Purchased
PCs listed on Exhibit B attached hereto.] The Original PCs delivered herewith
shall be subject to the terms of the Custodial Agreement on the date hereof.
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Custodial Agreement.
IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by
its officer thereunto duly authorized as of the day and year first above
written.
CRIIMI MAE INC.
By:
Title:
Name:
-4-
<PAGE>
EXHIBIT III
APPROVED SECONDARY MARKET PARTICIPANTS
Bear, Stearns & Co.
CS First Boston Corporation
Goldman, Sachs & Co.
Lehman Brothers
Salomon Brothers Inc.
Smith Barney Shearson
Werthiem, Schroeder
-5-
<PAGE>
EXHIBIT IV
Letter of Instructions to Master Servicer and Servicers
[Servicer]
(date)
Re: Participation and Servicing Agreement, by and between and, dated (the
"Participation and Servicing Agreement)
Dear Sir/Madam:
CRIIMI MAE, Inc. ("Seller") has sold to German American Capital Corporation
("Buyer") its right, title, and interest in and to the mortgage loan(s)
identified on Appendix A attached to this letter and made a part hereof (the
"Mortgage Loans"). Accordingly, Buyer may request registration of the
participation certificates related to such Mortgage Loans (the "Participation
Certificates") in the name of Buyer. Upon receipt of such a request from Buyer
for registration of Participation Certificates in the name of Buyer, please
immediately follow Buyer's instructions to register such Participation
Certificates. Unless otherwise further notified in writing by Buyer that an
event of default has occurred under its repurchase agreement with Seller, Seller
retains (i) all servicing-related authority under the Participation and
Servicing Agreement (and should be contacted directly regarding servicing
matters) and (ii) its right to directly receive payments of principal and
interest at the account so directed by Seller.
Sincerely,
CRIIMI MAE, Inc.
By:
Name: Ms. Cynthia O. Azzara
Title: Vice President/Chief Financial Officer
cc: German American Capital Corporation
-6-
<PAGE>
EXHIBIT V
Authorized Representatives of Seller
Name Specimen Signature
William B. Dockser
----------------------------------
H. William Willoughby
----------------------------------
Jay R. Cohen
----------------------------------
Nancy E. Currier
----------------------------------
Peter M. Smith
----------------------------------
Jamie I. Sapp
----------------------------------
Cynthia O. Azzara
----------------------------------
Deborah A. Linn
----------------------------------
Frederick Burchill
----------------------------------
-7-
<PAGE>
ANNEX A
Additional Definitions
"PC Mortgage File" means with respect to each Underlying Mortgage Loan the
following original documents:
(a) the original Mortgage Note or Deed of Trust Note, as the case may be,
bearing an FHA signed endorsement and all intervening endorsement, endorsed
"Pay to the order of ______, without recourse" and signed in the name of
the last endorsee by an authorized officer;
(b) the original Mortgage or Deed of Trust, as the case may be, with evidence
of recording thereon or copies certified by the related recording office or
if neither of the foregoing is available by closing, a copy of the Mortgage
with evidence of recording certified by the title or abstract company;
(c) a copy of the UCC-1 Financing Statement, certified as true and UCC-3
Assignment with purchasers name shown thereon, which financing statement
shall be in form and substance acceptable for filing;
(d) the original mortgage title insurance policy or attorney's opinion of title
and abstract of title; and
(e) the original of any security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage.
-8-
<PAGE>
Exhibit 4(jj)
<PAGE>
COMMITTED MASTER REPURCHASE AGREEMENT
Dated as of January 23, 1995
Between:
GERMAN AMERICAN CAPITAL CORPORATION, AS BUYER
and
CRIIMI MAE INC., AS SELLER
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in which CRIIMI
MAE Inc. ("SELLER"), agrees to transfer to German American Capital Corporation
("BUYER") securities or financial instruments ("SECURITIES") against the
transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer
to Seller such Securities at a date certain until April 1, 1996 or on demand, as
specified in the Confirmation, against the transfer of funds by Seller,
PROVIDED, HOWEVER, that Buyer may, in its sole discretion, elect to terminate
this Agreement and all outstanding Transactions hereunder on April 2, 1995,
PROVIDED FURTHER, HOWEVER, that if Buyer so elects, it shall, following such
termination, enter into a Committed Master Repurchase Agreement for a period of
364 days following the date of such termination. Each such transaction shall be
referred to herein as a "TRANSACTION" and shall be governed by this Agreement
and the related Confirmation, unless otherwise agreed in writing.
2. DEFINITIONS
"ACT OF INSOLVENCY" means, with respect to any party, (i) and its Affiliates,
the filing of a petition, commencing, or authorizing the commencement of any
case or proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law relating to the protection of creditors,
or suffering any such petition or proceeding to be commenced by another which is
consented to, not timely contested or results in entry of an order for relief;
(ii) seeking the appointment of a receiver, trustee, custodian or
<PAGE>
similar official for such party or an Affiliate or any substantial part of the
property of either, (iii) the appointment of a receiver, conservator, or manager
for such party or an Affiliate by any governmental agency or authority having
the jurisdiction to do so; (iv) the making or offering by such party or an
Affiliate of a composition with its creditors or a general assignment for the
benefit of creditors, (v) the admission by such party or an Affiliate of such
party's or such Affiliate's inability to pay its debts or discharge its
obligations as they become due or mature; or (vi) any governmental authority or
agency or any person, agency or entity acting or purporting to act under
governmental authority shall have taken any action to condemn, seize or
appropriate, or to assume custody or control of, all or any substantial part of
the property of such party or of any of its Affiliates, or shall have taken any
action to displace the management of such party or of any of its Affiliates or
to curtail its authority in the conduct of the business of such party or of any
of its Affiliates.
"ADDITIONAL COLLATERAL" means Securities or cash provided by Seller to Buyer or
its designee pursuant to Section 4(a).
"AFFILIATE" means an affiliate of a party as such term is defined in the United
States Bankruptcy Code in effect from time to time.
"AGREEMENT" means this Committed Master Repurchase, as amended from time to
time.
"AVERAGE MARKET VALUE" means the sum of the aggregate Market Value for all
Purchased Securities (excluding any cash transferred by Seller to Buyer pursuant
to Section 4(a)) divided by the number of Purchased Securities.
"BUSINESS DAY" means a day other than (i) a Saturday or Sunday, or (ii) a day in
which the New York Stock Exchange or banks in the State of Maryland are
authorized or obligated by law or executive order to be closed.
"BUYER" has the meaning specified in Section 1.
"COLLATERAL" has the meaning specified in Section 6.
"COLLATERAL AMOUNT" means, with respect to any Transaction, the amount obtained
by application of the Collateral Amount Percentage to the Repurchase Price for
such Transaction.
"COLLATERAL AMOUNT PERCENTAGE" means the amount set forth in the Confirmation.
"COLLATERAL DEFICIT" has the meaning specified in Section 4(a).
"COLLATERAL EXCESS" has the meaning specified in Section 4(b).
<PAGE>
"COMMITMENT LETTER" means that certain commitment letter, dated as of January
19, 1995, from Buyer to Seller.
"CONFIRMATION" has the meaning specified in Section 3(c).
"CUSTODIAL AGREEMENT" means that certain custodial agreement, dated as of
January 23, 1995, by and between, Buyer and The Bank of New York.
"CUSTODIAN" means The Bank of New York, as custodian under the Custodial
Agreement, or its successor in interest or assigns.
"EVENT OF DEFAULT" has the meaning specified in Section 13.
"FACILITY AMOUNT" means $300,000,000 (three hundred million dollars) or such
amount as agreed by Buyer and Seller.
"FHA REPURCHASE AGREEMENT" means that certain Committed Master Repurchase
Agreement Governing Purchases and Sales of Participation Certificates, dated as
of January 23, 1995, by and among GACC and Seller.
"GAAP" means Generally Accepted Accounting Principles.
"GACC" means German American Capital Corporation.
"GNMA" means the Government National Mortgage Association.
"INCOME" means, with respect to any Securities at any time, any principal
thereof then payable and all interest, dividends or other distributions payable
thereon.
"LATE PAYMENT FEE" has the meaning specified in Section 5(b).
"MARKET VALUE" means as of any date with respect to any Purchased Securities,
the price at which such Purchased Securities could readily be sold as determined
in good faith by Buyer PROVIDED, HOWEVER, that in making such determination,
Buyer shall not take into account any Purchased Securities with respect to which
there is a breach of a representation, warranty or covenant made by Seller in
this Agreement that materially adversely affects Buyer's interest in such
Purchased Security and which breach has not been cured PROVIDED FURTHER,
HOWEVER, that if Seller timely notifies Buyer in writing that it reasonably
believes that the price determined in good faith by Buyer does not adequately
reflect the price at which a Purchased Security could readily be sold, the
"Market Value" of such Purchased Security shall be the average of the price
determined by Buyer and two (2) written bids obtained by Seller, and timely
delivered to Buyer, from two (2) of the secondary market participants set forth
in Exhibit III attached hereto or any New York based affiliate of such
participants, provided that Seller shall first contact Bear, Stearns & Co. and
CS First Boston Corporation.
<PAGE>
"MINIMUM GNMA REPURCHASE AGREEMENT AMOUNT" means an amount not (i) less than
thirty-four percent (34%) for the first 90 days after the date hereof and (ii)
less than forty percent (40%) thereafter of the then aggregate outstanding
purchase price under this Agreement and the FHA Repurchase Agreement, PROVIDED
FURTHER, HOWEVER, that the "Minimum GNMA Repurchase Agreement Amount" may be
reduced or increased upon the request of Seller and with the consent of Buyer,
in its sole discretion.
"MINIMUM BALANCE" means the amount set forth in the Commitment Letter.
"PARTICIPATION CERTIFICATE" means a certificate evidencing that Seller is the
registered owner of a (i) 100% undivided participating beneficial interest or
(ii) certificate which is one of only two certificates which in the aggregate
represent a 100% beneficial interest and the other certificate is owned by the
originator of such interest, in each case in FHA-insured project mortgage loans
pooled by the originator of such certificate.
"PAYMENT DATE" has the meaning specified in Section 5(b).
"PERIODIC PAYMENT" has the meaning specified in Section 5(b).
"PRICE DIFFERENTIAL" means, with respect to any Transaction hereunder as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the Repurchase Date (reduced by any amount of such Price Differential previously
paid by Seller to Buyer pursuant to Section 5(b) with respect to such
Transaction).
"PRICING RATE" means the per annum percentage rate specified in the Confirmation
for determination of the Price Differential.
"PRIME RATE" means the rate of interest published by THE WALL STREET JOURNAL,
northeast edition, as the "prime rate".
"PURCHASE DATE" means the date on which Purchased Securities are transferred by
Seller to the Buyer as specified in the Confirmation.
"PURCHASE PRICE" means (i) on the Purchase Date, the price at which Purchased
Securities are transferred by Seller to the Buyer, and (ii) thereafter, such
price decreased by the amount of any cash transferred by Seller to Buyer
pursuant to Section 5, excluding any Late Payment Fees.
"PURCHASED SECURITIES" means the Securities sold by Seller to Buyer in a
Transaction, any Additional Collateral and any Substituted Securities.
"REPLACEMENT SECURITIES" has the meaning specified in Section 14(b)(ii).
<PAGE>
"REPURCHASE DATE" means the date on which Seller is to repurchase the Purchased
Securities from Buyer, as specified in the Confirmation, unless (i) the
Transaction is terminable on demand, in which case "Repurchase Date" shall be
the date on which such Transaction is terminated or (ii) the Seller notifies the
Buyer of its intent to repurchase on a Reset Date and satisfies the requirements
set forth in Section 3(f) hereof, in which case "Repurchase Date" shall be the
Reset Date set forth in such notice.
"REPURCHASE PRICE" means the price at which Purchased Securities are to be
transferred from Buyer to Seller upon termination of a Transaction, which will
be determined in each case (including Transactions terminable upon demand) as
the sum of the Purchase Price and the Price Differential as of the date of such
determination.
"RESET DATE" means the GNMA Reset Date set forth in the Commitment Letter as
determined by the selected Pricing Rate.
"SELLER" has the meaning specified in Section 1.
"SERVICER" means any servicer of the Underlying Mortgage Loans.
"SUBSTITUTED SECURITIES" means any Securities substituted for Purchased
Securities in accordance with Section 9(a) hereof.
"TRANSACTION" has the meaning specified in Section 1.
"UNDERLYING MORTGAGE LOANS" means GNMA-insured mortgage loans represented by and
underlying each Purchased Security.
<PAGE>
3. INITIATION; CONFIRMATION; TERMINATION
(a) Simultaneous with the execution and delivery of this Agreement by Seller,
Seller shall deliver to Buyer an opinion of counsel that this Agreement is a
legal, valid and binding agreement, enforceable in accordance with its terms,
subject to bankruptcy and insolvency, and that the Agreement does not and will
not impact or adversely affect Seller's status as a "real estate investment
trust."
(b) It is the intent of Buyer and Seller that this Agreement be a committed
facility, and that, subject to the terms and conditions of this Agreement, Buyer
shall be obligated to purchase Securities upon Seller's advice of such
Transaction as described in Section 3(c), PROVIDED, HOWEVER, that unless and
until notified by Buyer in writing the aggregate Purchase Price of all Purchased
Securities for all Transactions not then terminated shall not be less than the
Minimum GNMA Repurchase Agreement Amount but shall not exceed the Facility
Amount.
(c) Seller shall advise Buyer of each Transaction at least two (2) Business
Days before the Purchase Date for such Transaction. Upon receiving such notice,
Buyer shall promptly deliver to Seller a written confirmation in the form of
Exhibit I attached hereto (a "CONFIRMATION"). Such Confirmation shall describe
the Purchased Securities (including CUSIP number, if any), identify Buyer and
Seller and set forth (i) the Purchase Date, (ii) the Purchase Price, (iii) the
Repurchase Date, unless the Transaction is to be terminable on demand, (iv) the
Pricing Rate applicable to the Transaction, and (v) any additional terms or
conditions not inconsistent with this Agreement.
(d) Each Confirmation, together with this Agreement, shall be conclusive
evidence of the terms of the Transaction(s) covered thereby unless objected to
in writing by the Seller no more than two (2) Business Days after the date the
Confirmation was received by the Seller or unless a corrected Confirmation is
sent by Buyer. An objection sent by the Seller must state specifically that the
writing is an objection, must specify the provision(s) being objected to by the
Seller, must set forth such provision(s) in the manner that the Seller believes
they should be stated, and must be received by Buyer no more than two (2)
Business Days after the Confirmation was received by the Seller.
(e) In the case of Transactions terminable upon demand, such demand shall be
made by Buyer or Seller by telephone or otherwise, no later than 10:00 a.m. on
the Business Day prior to the day on which such termination will be effective.
(f) Seller has the right in its sole discretion to repurchase Purchased
Securities subject to a Transaction on a Reset Date prior to the Repurchase Date
set forth on the applicable Confirmation, provided, Seller (i) must repurchase
all of the Purchased Securities in connection with such Transaction and (ii)
must notify Buyer in writing of such intent no later than five Business Days
prior to the related Reset Date. Such notice shall set forth the Reset Date,
the related Transaction and identify Purchased Securities to be repurchased on
such Reset Date.
<PAGE>
(g) On the Repurchase Date, termination of the Transaction will be effected by
transfer to Seller or its designee of the Purchased Securities (and any Income
in respect thereof received by Buyer not previously credited or transferred to,
or applied to the obligations of, Seller pursuant to Section 5(a)) against the
simultaneous transfer of the Repurchase Price to an account of Buyer.
<PAGE>
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions is less than the aggregate Collateral Amount for all
such Transactions (a "COLLATERAL DEFICIT"), then Buyer may, by written notice to
Seller, require Seller to transfer to Buyer or its designee additional
Securities reasonably acceptable to Buyer and/or cash ("ADDITIONAL COLLATERAL"),
so that the cash and aggregate Market Value of the Purchased Securities,
including any such Additional Collateral, will thereupon equal or exceed the
aggregate Collateral Amount.
(b) If at any time the aggregate Market Value of all Purchased Securities
subject to all Transactions exceeds the aggregate Collateral Amount for all such
Transactions (a "COLLATERAL EXCESS"), then Seller may, by written notice to
Buyer, require Buyer in such Transactions to transfer to Seller or its designee
Purchased Securities and/or cash so that the cash and aggregate Market Value of
the Purchased Securities, after deduction of any such Securities and/or cash so
transferred, will thereupon not exceed the aggregate Collateral Amount.
(c) Notice required pursuant to subsections (a) or (b) above may be given by
any means of telecopier or telegraphic transmission. A notice for the payment
or delivery in respect of a Collateral Deficit or Collateral Excess, as the case
may be, received before 1:00 p.m. on a Business Day, local time of the party
receiving the notice, must be met not later than 5:00 p.m. (New York time) on
the Business Day following the date on which notice was given. Any notice given
on a Business Date after 1:00 p.m., local time of the party receiving the
notice, shall be met not later than 5:00 p.m., (New York time) on the second
Business Day following the date on which notice was given. The failure of Buyer
or Seller, on any one or more occasions, to exercise its rights under
subsections (a) or (b) of this Section, respectively, shall not change or alter
the terms and conditions to which this Agreement is subject or limit the right
of the Buyer or Seller to do so at a later date. Buyer and Seller agree that a
failure or delay to exercise its rights under subsections (a) or (b) of this
Section shall not limit either party's rights under this Agreement or otherwise
existing by law or in any way create additional rights for the other party.
5. INCOME PAYMENTS
(a) Where a particular Transaction's term extends over an Income payment date
on the Purchased Securities subject to that Transaction such Income shall be the
property of Buyer. Notwithstanding the foregoing, Buyer agrees that the Seller
shall continue to receive Income unless and until an Event of Default by the
Seller occurs, in which case Buyer may at its election direct the recipient of
Income to hold such Income in a segregated account for and on behalf of Buyer
and/or remit such Income directly to Buyer.
<PAGE>
(b) Notwithstanding that Buyer and Seller intend that the Transactions
hereunder be sales to Buyer of the Purchased Securities, Seller shall pay to
Buyer the accreted value of the Price Differential (less any amount of such
Price Differential previously paid by Seller to Buyer)("PERIODIC PAYMENT") on
the first Business Day of each calendar quarter (each, a "PAYMENT DATE"). If
Seller fails to make the Periodic Payment by 5:00 p.m. (New York time) on the
Business Day following the Payment Date, Seller shall be obligated to pay to
Buyer (in addition to, and together with, the Periodic Payment) a late payment
fee of $100 per day (the "LATE PAYMENT FEE") until the Periodic Payment is
received by Buyer.
(c) Buyer shall offset against the Repurchase Price of each such Transaction
all Income and payments actually received by Buyer pursuant to Sections 5(a) and
(b), respectively, excluding any Late Payment Fees paid pursuant to Section
5(b).
<PAGE>
6. SECURITY INTEREST
Buyer and Seller intend that the Transactions hereunder be sales to the Buyer of
the Purchased Securities and not loans from the Buyer to the Seller secured by
the Purchased Securities. However, in order to preserve the Buyer's rights
under this Agreement in the event that a court or other forum recharacterizes
the Transactions hereunder as loans and as security for the performance by
Seller of all of Seller's obligations to Buyer under this Agreement and the
Transactions entered into pursuant to this Agreement, Seller grants to Buyer a
first priority security interest in all of the Purchased Securities with respect
to all Transactions hereunder and all proceeds thereof, all securities, notes,
mortgages, monies or other property of Seller, and all distributions thereon and
proceeds thereof, whenever the same is held or carried by or for Buyer or its
Affiliates, or any of its agents, including property held or carried in accounts
maintained by GACC or its Affiliates at financial intermediaries (collectively,
the "COLLATERAL"). In addition, in the event any court, forum or regulatory
authority having jurisdiction over Seller were to determine that the Underlying
Mortgage Loans (or any beneficial interest therein or payment or payments
thereunder) are the property of Seller, Seller shall be deemed to have pledged
to Buyer as security for the performance of Seller of its obligations under each
such Transaction, and shall be deemed to have granted Buyer a first priority
security interest in, such mortgage loans and all related servicing agreements,
servicing records, insurance, income, custodial accounts, escrow accounts, and
any other contract rights, general intangibles and other assets relating to such
mortgage loans.
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds
hereunder shall be in immediately available funds.
(b) Subject to Section 7(c), on the Purchase Date for each Transaction,
ownership of the Purchased Securities shall be transferred to the Buyer against
the simultaneous transfer of the Purchase Price to an account of Seller
specified in the Confirmation. Seller, simultaneously with the delivery to the
Buyer of the Purchased Securities relating to each Transaction hereby sells,
transfers, conveys and assigns to Buyer without recourse, but subject to the
terms of this Agreement, all the right, title and interest of Seller in and to
the Purchased Securities together with all right, title and interest in and to
the proceeds of any related insurance policies.
(c) Notwithstanding anything to the contrary in this Agreement, Buyer shall
have no obligation to purchase any Securities on any Purchase Date if, after
such purchase:
(i) an Event of Default by the Seller will have occurred and be
continuing, or an Event of Default by the Seller would occur with notice or
the passing of time;
<PAGE>
(ii) the Repurchase Date for such Transaction would be later than April 1,
1996; or
(iii) the aggregate Purchase Price of all Purchased Securities for all
Transactions not then terminated would exceed the Facility Amount.
(d) All Securities transferred from Seller to Buyer (i) shall be in suitable
form for transfer or shall be accompanied by duly executed instruments of
transfer or assignment in blank and such other documentation as the party
receiving possession may reasonable request, (ii) shall be transferred on the
book-entry system of a Federal Reserve bank, or (iii) shall be transferred by
any other method mutually acceptable to Seller and Buyer. As used herein with
respect to Securities, "transfer" is intended to have the same meaning as when
used in Section 8-313 of the New York Uniform Commercial Code or, where
applicable, in any federal regulation governing transfers of Securities. With
respect to any transfer pursuant to Section 7(d)(i), physical documents shall be
delivered and released to the Custodian.
(e) Any cash held by Buyer or its designee as Additional Collateral shall be
deposited in an interest bearing account. The interest on such cash shall
accrue for the benefit of Seller and shall be held by Buyer or its designee as
Additional Collateral.
(f) Buyer and Seller agree that at no time shall the Average Market Value (as
determined by the current face amount of the Purchased Securities, but in other
respects complying with the definition of Average Market Value and Market Value,
as used herein) be less than $3,000,000. If for any reason the Average Market
Value is less than $3,000,000, the Pricing Rate for each outstanding Transaction
shall be increased by five (5) basis points for the period during which the
Average Market Value is less than $3,000,000.
8. HYPOTHECATION OR PLEDGE OF PURCHASED SECURITIES
Title to all Purchased Securities shall pass to Buyer and Buyer shall have free
and unrestricted use of all Purchased Securities. Nothing in this Agreement
shall preclude Buyer from engaging in repurchase transactions with the Purchased
Securities or otherwise pledging, repledging, hypothecating, or rehypothecating
the Purchased Securities, but no such transaction shall relieve Buyer of its
obligations to transfer the Purchased Securities to Seller pursuant to Section
3. Nothing contained in this Agreement shall obligate Buyer to segregate any
Purchased Securities delivered to Buyer by Seller.
<PAGE>
9. SUBSTITUTION
(a) Subject to Section 9(b), Seller may, upon fifteen (15) Business Days
written notice to Buyer, substitute other Securities for any Purchased
Securities, PROVIDED, HOWEVER, that the fifteen (15) Business Days written
notice requirement shall not apply to any substitution made (i) with respect to
any Purchased Security for which Seller receives written notice from Servicer
that the Underlying Mortgage Loan is in default or will be prepaid, or (ii) for
the purpose of satisfying a Collateral Deficit pursuant to Section 4(a). Such
substitution shall be made by (i) the transfer to the Custodian of such
substituted Securities, and (ii) the transfer to Seller or its designee of the
Purchased Securities requested for release. After substitution, the substituted
Securities shall be deemed to be Purchased Securities.
(b) Notwithstanding anything to the contrary in this Agreement, Seller may not
substitute other Securities for any Purchased Securities if (i) Buyer does not
consent to such substitution, which consent shall not be unreasonably withheld,
(ii) after taking into account such substitution, a Collateral Deficit were to
occur, and (iii) such substitution would impact or adversely affect Seller's
status as a "real estate investment trust." Upon Buyer's reasonable request,
Seller shall deliver to Buyer an opinion of Arent, Fox, Kintner, Plotkin & Kahn
or other nationally recognized tax counsel that such substitution will not
impact or adversely affect Seller's status as a "real estate investment trust."
10. REPRESENTATIONS
(a) Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance; (ii) it will engage in such Transactions as principal (or, if
agreed in writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal); (iii) the person signing this Agreement on its
behalf is duly authorized to do so on its behalf (or on behalf of any such
disclosed principal); (iv) no approval, consent or authorization of the
Transactions contemplated by this Agreement from any federal, state, or local
regulatory authority having jurisdiction over it is required or, if required,
such approval, consent or authorization has been or will, prior to the Purchase
Date, be obtained; (v) the execution, delivery, and performance of this
Agreement and the Transactions hereunder will not violate any law, regulation,
order, judgment, decree, ordinance, charter, by-law, or rule applicable to it or
its property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
agreement or other instrument by which it is bound or by which any of its assets
are affected; (vi) it has received approval and authorization to enter into this
Agreement and each and every Transaction actually entered into hereunder
pursuant to its internal policies and procedures; and (vii) neither this
Agreement nor any Transaction pursuant hereto are entered into in contemplation
of insolvency or with intent to hinder, delay or defraud any creditor.
<PAGE>
(b) The Seller represents and warrants to the Buyer that as of the Purchase
Date for the purchase of any Purchased Securities by the Buyer from the Seller
and as of the date of this Agreement and any Transaction hereunder and at all
times while this Agreement and any Transaction thereunder is in full force and
effect:
(i) ORGANIZATION. The Seller is duly organized, validly existing and in good
standing under the laws and regulations of the state of
Seller's organization and is duly licensed, qualified, and
in good standing in every state where Seller transacts
business.
(ii) NO LITIGATION. There is no action, suit, proceeding, investigation, or
arbitration pending or threatened against the Seller, which
may result in any material adverse change in the business,
operations, financial condition, properties, or assets of
the Seller, or which may have an adverse effect on the
validity of this Agreement or the Purchased Securities or
any action taken or to be taken in connection with the
obligations of the Seller contemplated herein.
(iii) NO BROKER. The Seller has not dealt with any broker, investment banker,
agent, or other person, except for the Buyer, who may be
entitled to any commission or compensation in connection
with the sale of Purchased Securities pursuant to this
Agreement.
(iv) GOOD TITLE TO COLLATERAL. Purchased Securities shall be free and
clear of any lien, encumbrance or impediment to transfer,
and the Seller represents and warrants the foregoing to the
Buyer and represents and warrants that it has good, valid
and marketable title or right to sell and transfer such
Purchased Securities to the Buyer.
(v) UNENCUMBERED ASSETS. Seller shall maintain cash, cash equivalents
(including lines of credit in an amount up to $15,000,000)
and other assets (including the unencumbered common stock of
CRI Liquidating REIT, Inc. owned and held by Seller but
excluding any hedge contracts owned by Seller) deemed
satisfactory in the sole judgment by Buyer (the loan value
of which shall be determined in the sole judgment of Buyer)
equal to at least $5,000,000.
(vi) SELECTION PROCESS. The Purchased Securities were selected from
among the outstanding Securities in the Seller's portfolio
as to which the representations and warranties set forth in
this
<PAGE>
Agreement could be made and such selection was not made in a
manner so as to affect adversely the interests of the Buyer.
(c) On the Purchase Date for any Transaction, Buyer and Seller shall each be
deemed to have made all the foregoing representations, as applicable, with
respect to itself as of such Purchase Date.
<PAGE>
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until
this Agreement is no longer in force with respect to any Transaction, the
Seller covenants that it will not:
(a) take any action which would directly or indirectly impair or adversely
affect the Buyer's title to or the value of the Purchased Securities; or
(b) pledge, assign, convey, grant, bargain, sell, set over, deliver or
otherwise transfer any interest in the Purchased Securities to any person
not a party to this Agreement nor will the Seller create, incur or permit
to exist any lien, encumbrance or security interest in or on the Purchased
Securities except as described in Section 6 of this Agreement.
12. AFFIRMATIVE COVENANTS OF THE SELLER
(a) Seller covenants that it will promptly notify Buyer of any material
adverse change in its business operations and/or financial condition,
PROVIDED, HOWEVER, that nothing in this Section 12 shall relieve Seller of
its obligations pursuant to Section 10(b)(v) or pursuant to any other
Section of this Agreement.
(b) Seller shall provide Buyer with copies of such documentation as Buyer
may reasonably request evidencing the truthfulness of the representations
set forth in Section 10, including but not limited to resolutions
evidencing the approval of this Agreement by Seller's board of directors or
loan committee, and copies of the minutes of the meetings of Seller's board
of directors or loan committee at which this Agreement and the Transactions
contemplated by this Agreement were approved.
(c) Seller shall, at Buyer's request, take all action necessary to ensure
that Buyer will have a first priority security interest in the Purchased
Securities.
(d) Seller covenants that it will not create, incur or permit to exist any
lien, encumbrance or security interest in or on any of the Collateral
without the prior express written consent of Buyer.
(e) Seller shall notify Buyer as soon as possible, but in no event later
than three (3) Business Days after obtaining actual knowledge thereof, if
any event has occurred that constitutes an Event of Default with respect to
Seller or any event that with the giving of notice or lapse of time, or
both, would become an Event of Default with respect to Seller.
13. EVENTS OF DEFAULT
(a) If any of the following events (each, an "EVENT OF DEFAULT") occur,
the Seller and Buyer shall have the rights set forth in Section 14, as
applicable.
<PAGE>
(i) Seller or Buyer fails to satisfy or perform any material obligation or
covenant under this Agreement, other than the covenant set forth in
Section 12(b);
(ii) Seller fails to satisfy or perform the covenant set forth in Section 12(b)
within thirty (30) days after Buyer gives Seller written notice of
such failure;
(iii) any representation made by Seller or Buyer, other than the
representation set forth in Section 10(b)(v), shall have been
incorrect or untrue in any material respect when made or repeated or
deemed to have been made or repeated;
(iv) Seller fails to cure any breach of the representation set forth in Section
10(b)(v) within five (5) days after Buyer gives Seller written notice
of such breach.
(v) an Act of Insolvency occurs with respect to Buyer or Seller;
(vi) Buyer or Seller shall admit its inability to, or its intention not to,
perform any of its obligations hereunder; (vii) any governmental,
regulatory, or self-regulatory authority takes any
action to remove, limit, restrict, suspend or terminate the rights,
privileges, or operations of the Seller or any of its Affiliates,
including suspension as an issuer or lender of mortgage loans, which
suspension has a material adverse effect on the ordinary business
operations of Seller or Seller's Affiliate, and which continues for
more than 24 hours;
(viii) Seller dissolves, merges or consolidates with another entity unless it
is the surviving party, or sells, transfers, or otherwise disposes of
a material portion of its business or assets, PROVIDED, HOWEVER, that
a merger shall not constitute an Event of Default if Seller obtains
the prior written consent of the Buyer; Buyer dissolves, merges or
consolidates with another entity unless it is the surviving party, or
sells, transfers, or otherwise disposes of a material portion of its
business or assets, PROVIDED, HOWEVER, that such action shall not
constitute an Event of Default if any surviving entity legally bound
hereunder has the ability to perform the obligations set forth in this
Agreement;
<PAGE>
(ix) Buyer, in its good faith judgment, has reasonable cause to believe that (A)
there has been a material adverse change in the business, operations,
corporate structure or financial condition or prospects of the Seller;
(B) Seller will not meet any of its obligations under any Transaction
pursuant to this Agreement, or any other agreement between the
parties; or (C) a material adverse change in the financial or legal
condition of Seller may occur due to the pendency or threatened
pendency of a material legal action against Seller or any of its
Affiliates, and Seller fails to provide Buyer with adequate assurances
(including without limitation performance guarantees), within 24 hours
of a written request therefor, of its ability to perform its
obligations hereunder or under any other agreement between the
parties;
(x) Except with respect to Seller's obligation under Section 5(b), Seller or
any of its Affiliates shall fail to pay when due (including any grace
period provided under the applicable documents) any amount in respect
of indebtedness for money borrowed or for the deferred purchase price
of property created, issued, guaranteed, incurred or assumed by any of
them, or any other event shall occur or any condition shall exist in
respect of any such indebtedness the effect of which is to cause (or
permit any holder thereof or a trustee to cause) such indebtedness to
become due prior to its stated maturity;
(xi) Seller shall fail to pay within five (5) Business Days of each Payment Date
any and all amounts payable pursuant to Section 5(b);
(xii) Seller or any of its Affiliates shall default or fail to perform under
any agreement or transaction between Buyer or any of its Affiliates,
or Seller or any of its Affiliates, or Seller or any of its Affiliates
shall breach any covenant or condition in any agreement or transaction
between Buyer or any of its Affiliates and Seller or any of its
Affiliates, PROVIDED, HOWEVER, that any such default, failure to
perform or breach shall not constitute an Event of Default if Seller
or any of its Affiliates cures such default, failure to perform or
breach, as the case may be, within the grace period, if any, provided
under the applicable agreement;
(xiii) Seller fails to provide quarterly unaudited and annual audited
financial statements within 50 and 95 days, respectively, after the
<PAGE>
date on which such period ends, or fails to deliver in a timely manner
such financial or other information as Buyer may from time to time
reasonably request;
(xiv) Subject to Section 13(a)(xv), Seller's ratio of consolidated total
liabilities (excluding payables in the normal course of business) to
consolidated shareholders' equity (both computed in accordance with
GAAP) exceeds three to one (3 to 1);
(xv) Seller pledges, directly or indirectly, hypothecates or encumbers any of
its assets or engages in repurchase transactions or similar
transactions with any of its assets (excluding (i) assets already
pledged under existing facilities, (ii) any assets required to be
pledged for purposes of collateral maintenance under such facilities
and (iii) subordinated debt securities subject to master repurchase
agreements with financial institutions, provided that the aggregate
indebtedness pursuant to such repurchase agreements shall not exceed
$50,000,000 and provided that the pledge of any other assets of Seller
pursuant to such repurchase agreements shall not cause an Event of
Default hereunder) before notification to and written approval by
Buyer, which approval shall not be unreasonably withheld;
(xvi) Seller fails to maintain consolidated shareholders equity (computed in
accordance with GAAP) of at least $125,000,000 (one hundred and twenty
five million dollars);
(xvii) Seller incurs three (3) consecutive quarters of consolidated net losses
on either a GAAP or tax basis;
(xviii) Seller fails to maintain interest rate hedges, reasonably acceptable to
Buyer, on at least 75% of its floating rate liabilities;
(xix) Seller fails to promptly certify at Buyer's request that no Event of
Default has occurred or is continuing at the time of the
certification, PROVIDED, HOWEVER, that such certification shall be
made in any event by Seller no later than fifty days following the end
of each calendar quarter for the first three calendar quarters of the
year and no later than ninety-five days following the end of the last
calendar quarter of the year;
(xx) A final judgment by any competent court in the United States of America
for the payment of money in an amount of at least
<PAGE>
$100,000 is rendered against the Seller, and the same remains
undischarged or unpaid for a period of sixty (60) days during which
execution of such judgment is not effectively stayed;
(xxi) This Agreement shall for any reason cease to create a valid first
priority security interest in any of the Purchased Securities
purported to be covered hereby;
(xxii) Seller fails to maintain the aggregate Purchase Price of all Purchased
Securities for all Transactions not then terminated in an amount equal
to or greater than the Minimum GNMA Repurchase Agreement Amount; or
(xxiii) Seller fails to maintain the aggregate Purchase Price of all Purchased
Securities and "Purchase Price" (as defined in the FHA Repurchase
Agreement) of all Purchased PCs (as defined in the FHA Repurchase
Agreement) for all Transactions not then terminated in an amount equal
to or greater than the Minimum Balance.
(b) In making a determination as to whether an Event of Default has
occurred, the Buyer shall be entitled to rely on reports published or
broadcast by media sources believed by the Buyer to be generally reliable
and on information provided to it by any other sources believed by it to be
generally reliable, provided that the Buyer reasonably and in good faith
believes such information to be accurate and has taken such steps as may be
reasonable in the circumstances to attempt to verify such information.
<PAGE>
14. REMEDIES
(a) If an Event of Default occurs with respect to the Seller, the
following rights and remedies are available to the Buyer:
(i) At the option of the Buyer, exercised by written notice to the Seller
(which option shall be deemed to have been exercised, even if no
notice is given, immediately upon the occurrence of an Act of
Insolvency), the Repurchase Date for each Transaction hereunder shall
be deemed immediately to occur. Notwithstanding that the Repurchase
Date shall be deemed immediately to have occurred upon the exercise or
deemed exercise of such option by the Buyer, for purposes of
determining the Repurchase Price, the Repurchase Date shall be the
date specified in the Confirmation for such Transaction.
(ii) If the Buyer exercises or is deemed to have exercised the option referred
to in subsection (a)(i) of this Section,
(A) the Seller's obligations hereunder to repurchase all Purchased Securities
in such Transactions shall thereupon become immediately due and
payable,
(B) to the extent permitted by applicable law, the Repurchase Price with
respect to each such Transaction shall be increased by the aggregate
amount obtained by daily application of, on a 360 day per year basis
for the actual number of days during the period from and including the
date of the exercise or deemed exercise of such option to but
excluding the date of payment of the Repurchase Price as so increased,
(x) the greater of the Prime Rate or the Pricing Rate for each such
Transaction multiplied by (y) the Repurchase Price for such
Transaction (decreased as of any day by (I) any amounts actually in
the possession of Buyer pursuant to clause (C) of this subsection,
(II) any proceeds from the sale of Purchased Securities applied to the
Repurchase Price pursuant to subsection (a)(ix) of this Section, and
(III) any amounts applied to the Repurchase Price pursuant to
subsection (a)(iii) of this Section), and
(C) all Income and payments actually received by the Buyer pursuant to Sections
5(a) and (b), excluding any Late Payment Fees paid pursuant to Section
5(b), shall be applied to the aggregate unpaid Repurchase Price owed
by the Seller.
(iii) After one Business Day's notice to the Seller with respect to an Event
of Default relating to a failure by Seller to make a required
<PAGE>
payment pursuant to this Agreement, or after three Business Day's
notice to Seller in connection with any other Event of Default
(which notice need not be given if an Act of Insolvency shall
have occurred, and which may be the notice given under subsection
(a)(i) of this Section), the Buyer may (A) immediately sell, at a
public or private sale in a commercially reasonable manner and at
such price or prices as the Buyer may reasonably deem
satisfactory any or all Purchased Securities subject to a
Transaction hereunder or (B) in its sole discretion elect, in
lieu of selling all or a portion of such Purchased Securities, to
give the Seller credit for such Purchased Securities in an amount
equal to the Market Value of the Purchased Securities against the
aggregate unpaid Repurchase Price and any other amounts owing by
the Seller hereunder. The proceeds of any disposition of
Purchased Securities shall be applied first to the costs and
expenses incurred by the Buyer in connection with the Seller's
default; second to consequential damages, including but not
limited to costs of cover and/or related hedging transactions,
PROVIDED, HOWEVER, that Buyer shall act in good faith and in a
timely manner to mitigate damages to the extent practicable;
third to the Repurchase Price; and fourth to any other
outstanding obligation of the Seller to the Buyer or its
Affiliates.
(iv) The parties recognize that it may not be possible to purchase or sell all
of the Purchased Securities on a particular Business Day, or in a
transaction with the same purchaser, or in the same manner
because the market for such Purchased Securities may not be
liquid. In view of the nature of the Purchased Securities, the
parties agree that liquidation of a Transaction or the underlying
Purchased Securities does not require a public purchase or sale
and that a good faith private purchase or sale shall be deemed to
have been made in a commercially reasonable manner. Accordingly,
Buyer may elect, in its sole discretion, the time and manner of
liquidating any Purchased PC and nothing contained herein shall
(A) obligate Buyer to liquidate any Purchased PC on the
occurrence of an Event of Default or to liquidate all Purchased
Securities in the same manner or on the same Business Day or (B)
constitute a waiver of any right or remedy of Buyer. However, in
recognition of the parties' agreement that the Transactions
hereunder have been entered into in consideration of and in
reliance upon the
<PAGE>
fact that all Transactions hereunder constitute a single business
and contractual relationship and that each Transaction has been
entered into in consideration of the other Transactions, the
parties further agree that Buyer shall use its best efforts to
liquidate all Transactions hereunder upon the occurrence of an
Event of Default as quickly as is prudently possible in the
reasonable judgment of Buyer.
(v) Seller shall be liable to Buyer for (A) the amount of all expenses,
including reasonable legal or other expenses incurred by Buyer in
connection with or as a consequence of an Event of Default, and
(B) consequential damages including, without limitation, all
costs incurred in connection with hedging or covering
transactions, PROVIDED, HOWEVER, that Buyer shall act in good
faith and in a timely manner to mitigate damages to the extent
practicable.
(vi) Buyer shall have all the rights and remedies provided herein, provided by
applicable federal, state, foreign, and local laws (including,
without limitation, the rights and remedies of a secured party
under the Uniform Commercial Code of the State of New York, to
the extent that the Uniform Commercial Code is applicable, and
the right to offset any mutual debt and claim), in equity, and
under any other agreement between Buyer and Seller.
(vii) Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and,
except to the extent provided in subsections (a)(i) and (iii) of
this Section, at any time thereafter without notice to Seller.
All rights and remedies arising under this Agreement as amended
from time-to-time hereunder are cumulative and not exclusive of
any other rights or remedies which Buyer may have.
(viii) In addition to its rights hereunder, Buyer shall have the right to
proceed against any assets of Seller which may be in the
possession of Buyer or its designee, including the right to
liquidate such assets and to set off the proceeds against monies
owed by Seller to Buyer pursuant to this Agreement. Buyer may
set off cash, the proceeds of the liquidation of the Purchased
Securities, any Collateral or its proceeds, and all other sums or
obligations owed by Seller to Buyer against all of Seller's
obligations to Buyer, whether under this
<PAGE>
Agreement, under a Transaction, or under any other agreement
between the parties, or otherwise, whether or not such
obligations are then due, without prejudice to Buyer's right to
recover any deficiency. Any cash, proceeds, or property in
excess of any amounts due, or which Buyer reasonably believes may
become due, to it from Seller shall be returned to Seller after
satisfaction of all obligations of Seller to Buyer.
(ix) Buyer may enforce its rights and remedies hereunder without prior judicial
process or hearing, and Seller hereby expressly waives any
defenses Seller might otherwise have to require Buyer to enforce
its rights by judicial process. Seller also waives any defense
Seller might otherwise have arising from the use of nonjudicial
process, enforcement and sale of all or any portion of the
Collateral, or from any other election of remedies, except that
Seller does not waive any defense it might have that the
Collateral was not sold in a commercially reasonable manner.
Seller recognizes that nonjudicial remedies are consistent with
the usages of the trade, are responsive to commercial necessity
and are the result of a bargain at arm's length.
(b) If an Event of Default occurs with respect to Buyer, the following
rights and remedies are available to the Seller:
(i) Upon tender by the Seller of payment of the aggregate Repurchase Price for
all such Transactions, the Buyer's right, title and interest in
all Purchased Securities subject to such Transactions shall be
deemed transferred to the Seller, and the Buyer shall deliver all
such Purchased Securities to the Seller or its designee at
Buyer's expense.
(ii) If the Seller exercises the option referred to in subsection (b)(i) of this
Section and the Buyer fails to deliver the Purchased Securities
to the Seller or its designee, after one Business Day's notice to
the Buyer, the Seller may (A) purchase securities ("REPLACEMENT
SECURITIES") of the same class and amount as any Purchased
Securities that are not delivered by the Buyer to the Seller or
its designee as required hereunder or (B) in its sole discretion
elect, in lieu of purchasing Replacement Securities, to be deemed
to have purchased Replacement Securities at a price therefor on
such date, equal to the Market Value of the Purchased Securities.
<PAGE>
(iii) The Buyer shall be liable to the Seller (A) with respect to Purchased
Securities (other than Additional Collateral), for any excess of
the price paid (or deemed paid) by the Seller for Replacement
Securities therefor over the Repurchase Price for such Purchased
Securities and (B) with respect to Additional Collateral, for the
price paid (or deemed paid) by the Seller for the Replacement
Securities therefor. In addition, the Buyer shall be liable to
the Seller for interest on such remaining liability with respect
to each such purchase (or deemed purchase) of Replacement
Securities from the date of such purchase (or deemed purchase)
until paid in full by Buyer. Such interest shall be at the
greater of the Pricing Rate or the Prime Rate.
<PAGE>
15. RECORDING OF COMMUNICATIONS
Buyer and Seller shall have the right (but not the obligation) from time to
time to make or cause to be made tape recordings of communications between
its employees and those of the other party with respect to Transactions,
provided, however, such right to record communications shall be limited to
communications of employees taking place on the trading floor of Buyer
and/or Seller. Buyer and Seller consent to the admissibility of such tape
recordings in any court, arbitration, or other proceedings. The parties
agree that a duly authenticated transcript of such a tape recording shall
be deemed to be a writing conclusively evidencing the parties' agreement.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter
into each Transaction hereunder in consideration of and in reliance upon
the fact that, all Transactions hereunder constitute a single business and
contractual relationship and that each has been entered into in
consideration of the other Transactions. Accordingly, each of Buyer and
Seller agrees (i) to perform all of its obligations in respect of each
Transaction hereunder, and that a default in the performance of any such
obligations shall constitute a default by it in respect of all Transactions
hereunder, (ii) that each of them shall be entitled to set off claims and
apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries, and other transfers made by either of
them in respect of any Transaction shall be deemed to have been made in
consideration of payments, deliveries, and other transfers in respect of
any other Transactions hereunder, and the obligations to make any such
payments, deliveries, and other transfers may be applied against each other
and netted.
17. NOTICES AND OTHER COMMUNICATIONS
(a) Unless another address is specified in writing by the respective party
to whom any written notice or other communication is to be given hereunder,
all such notices or communications shall be in writing or confirmed in
writing and delivered at the respective addresses set forth in the
Confirmation, except as provided in Section 4(c). All demands, notices and
communications hereunder shall be deemed to have been duly given if mailed,
by overnight courier, registered or certified mail, return receipt
requested, or, if by other means, when received by the other party. Any
such demand, notice or communication hereunder shall be deemed to have been
received on the date delivered to or received at the premises of the
addresses (as evidenced, in the case of registered or certified mail, by
the date noted on the return receipt).
(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person set forth in
Exhibit II hereto, and the Seller shall indemnify Buyer, defend, and hold
Buyer harmless from and against any and all liabilities, losses,
<PAGE>
damages, costs, and expenses of any nature arising out of or in connection
with any action taken by Buyer in response to such instructions received or
reasonably believed to have been received from the Seller. From time to
time, Seller may, by delivering to Buyer a revised exhibit, change the
information previously given pursuant to this Section, but the Buyer shall
be entitled to rely conclusively on the current exhibit until receipt of
the superseding exhibit.
<PAGE>
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the Commitment Letter and the applicable
Confirmation constitutes the entire understanding between Buyer and Seller
with respect to the subject matter it covers and shall supersede any
existing agreements between the parties containing general terms and
conditions for repurchase transactions involving Purchased Securities. By
acceptance of this Agreement, Buyer and Seller acknowledge that they have
not made, and are not relying upon, any statements, representations,
promises or undertakings not contained in this Agreement. Each provision
and agreement herein shall be treated as separate and independent from any
other provision or agreement herein and shall be enforceable
notwithstanding the unenforceability of any such other provision or
agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior
written consent of the other party, PROVIDED, HOWEVER, that Buyer may
assign its rights and obligations under this Agreement and/or under any
Transaction to an Affiliate that is subject to Deutsche Bank AG's
"declaration of backing", without the prior written consent of the other
party. Subject to the foregoing, this Agreement and any Transactions shall
be binding upon and shall inure to the benefit of the parties and their
respective successors and assigns. Nothing in this Agreement express or
implied, shall give to any person, other than the parties to this Agreement
and their successors hereunder, any benefit or any legal or equitable
right, power, remedy or claim under this Agreement.
20. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
21. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York, the
parties irrevocably waiving any objection thereto. If, for any reason,
federal jurisdiction is not available, and only if federal jurisdiction is
not available, the parties irrevocably agree to submit to the personal
jurisdiction of the Supreme Court of the State of New York, the parties
irrevocably waiving any objection thereto. Notwithstanding the foregoing
two sentences, at either party's sole option exercisable at any time not
later than thirty (30) days after an action or proceeding has been
commenced, the parties agree that the matter may be submitted to binding
arbitration in accordance with the commercial rules of the American
Arbitration Association then in effect in the State of New York and
judgment upon any award rendered by the arbitrator may be entered in any
court having jurisdiction thereof
<PAGE>
within the City, County and State of New York, PROVIDED, HOWEVER, that the
arbitrator shall not amend, supplement, or reform in any regard this
Agreement or the terms of any Confirmation, the rights or obligations of
any party hereunder or thereunder, or the enforceability of any of the
terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase
transactions and the secondary mortgage market in the City, County, and
State of New York.
22. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any
remedy hereunder by any party shall constitute a waiver of its right to
exercise any other remedy hereunder. No modification or waiver of any
provision of this Agreement and no consent by any party to a departure
herefrom shall be effective unless and until such shall be in writing and
duly executed by both of the parties hereto. Any such waiver or
modification shall be effective only in the specific instance and for the
specific purpose for which it was given.
<PAGE>
23. INTENT
The parties understand and intend that this Agreement and each Transaction
hereunder constitute a "repurchase agreement" as that term is defined in
Section 101 of Title 11 of the United States Code, as amended.
24. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case of
Transactions in which one of the parties is an "insured depository
institution" as that term is defined in Section 1831(a) of Title 12 of the
United States Code, as amended, funds held by the financial institution
pursuant to a Transaction hereunder are not a deposit and therefore are not
insured by the Federal Deposit Insurance Corporation, the Savings
Association Insurance Fund or the Bank Insurance Fund, as applicable.
25. NETTING
If Buyer and Seller are "financial institutions" as now or hereinafter
defined in Section 4402 of Title 12 of the United States Code ("SECTION
4402") and any rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on behalf of the
other under this Agreement or any Transaction hereunder shall be deemed to
be "payment obligations" and all amounts to be received by or on behalf of
one party from the other under this Agreement or any Transaction hereunder
shall be deemed to be "payment entitlements" within the meaning of Section
4402, and this Agreement shall be deemed to be a "netting contract" as
defined in Section 4402.
(b) The payment obligations and the payment entitlements of the parties
hereto pursuant to this Agreement and any Transaction hereunder shall be
netted as follows. In the event that either party (the "DEFAULTING PARTY")
shall fail to honor any payment obligation under this Agreement or any
Transaction hereunder, the other party (the "NONDEFAULTING PARTY") shall be
entitled to reduce the amount of any payment to be made by the
Nondefaulting Party to the Defaulting Party by the amount of the payment
obligation that the Defaulting Party failed to honor.
26. MISCELLANEOUS
(a) Time is of the essence under this agreement and all Transactions and
all references to a time shall mean New York time in effect on the date of
the action unless otherwise expressly stated in this Agreement.
(b) If there is any conflict between the terms of a Confirmation or a
corrected Confirmation issued by the Buyer and this Agreement, the
Confirmation shall prevail.
<PAGE>
(c) This Agreement may be executed in counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts
shall together constitute but one and the same instrument.
(d) The headings in this Agreement are for convenience of reference only
and shall not affect the interpretation or construction of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.
BUYER
GERMAN AMERICAN CAPITAL CORPORATION
By: /s/ Charlene S. Chai
-----------------------------------------
Name: Charlene S. Chai
Title: Vice President
By: /s/ John H. Cutting, III
-----------------------------------------
Name: John H. Cutting, III
Title: Director
SELLER
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
-----------------------------------------
Name: Jay R. Cohen
Title: Executive Vice President
<PAGE>
EXHIBITS
EXHIBIT I Confirmation
EXHIBIT II Approved Secondary Market Participants
EXHIBIT III Authorized Representatives of
Seller
<PAGE>
EXHIBIT I
[Form of Confirmation Letter]
(date)
CRIIMI MAE Inc.
Attention: Jay Cohen, Executive Vice President
11200 Rockville Pike
Rockville, MD 20852
Confirmation No.:_____________________
Ladies/Gentlemen:
This letter confirms our oral agreement to purchase from you the Securities
listed in Appendix I hereto, pursuant to the Committed Master Repurchase
Agreement between us, dated as of January 23, 1995, (the "Agreement"), as
follows:
Purchase Date:
Securities to be Purchased: See Appendix I hereto.
[Appendix I to Confirmation Letter
will list the Securities]
Aggregate Principal Amount of Securities:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Collateral Amount Percentage:
-2-
<PAGE>
Names and addresses for communications:
Buyer: Administrator, Joyce Landry
German American Capital Corporation
31 West 52nd Street
New York, New York 10019
with legal matters to:
Robert O. Link, Jr., Esquire
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Seller: Jay Cohen
Executive Vice President
CRIIMI MAE Inc.
11200 Rockville Pike
Rockville, MD 20852
Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Agreement.
GERMAN AMERICAN
CAPITAL CORPORATION
By:
Name:
Title:
Agreed and Acknowledged:
CRIIMI MAE INC.
-3-
<PAGE>
By:
Name:
Title:
-4-
<PAGE>
EXHIBIT II
APPROVED SECONDARY MARKET PARTICIPANTS
Bear, Stearns & Co.
CS First Boston Corporation
Goldman, Sachs & Co.
Lehman Brothers
Salomon Brothers Inc.
Smith Barney Shearson
Werthiem, Schroeder
-5-
<PAGE>
EXHIBIT III
Authorized Representatives of Seller
Name Specimen Signature
William B. Dockser
----------------------------------------
H. William Willoughby
----------------------------------------
Jay R. Cohen
----------------------------------------
Nancy E. Currier
----------------------------------------
Peter M. Smith
----------------------------------------
Jamie I. Sapp
----------------------------------------
Cynthia O. Azzara
----------------------------------------
Deborah A. Linn
----------------------------------------
Frederick Burchill
----------------------------------------
-6-
<PAGE>
Exhibit 4(kk)
<PAGE>
GERMAN AMERICAN CAPITAL CORPORATION
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
As of January 23, 1995
CRIIMI MAE Inc.
11200 Rockville Pike
Rockville, MD 20852
Re: Sale by CRIIMI MAE Inc. (the "SELLER") of certain FHA mortgage
loans (the "FHA LOANS") and certain GNMA securities (the "GNMA
SECURITIES") to German American Capital Corporation (the "BUYER")
Ladies and Gentlemen:
In connection with the above-referenced transaction, and in
consideration of the mutual agreements hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Buyer and the Seller hereby agree as follows:
1. On the date hereof (the "CLOSING DATE") the Seller has sold certain FHA
Loans to the Buyer pursuant to that certain Committed Master Repurchase
Agreement Governing Purchases and Sales of Participation Certificates,
dated as of the Closing Date, by and between the Seller and the Buyer (the
"FHA REPURCHASE AGREEMENT").
2. On the Closing Date the Seller has failed to sell any GNMA Securities which
Seller was required to sell to Buyer pursuant to that certain Commitment
Letter, by Buyer to Seller, dated as of January 19, 1995 (the "COMMITMENT
LETTER") and Committed Master Repurchase Agreement, by and between Buyer
and Seller, dated as of the Closing Date (the "GNMA REPURCHASE AGREEMENT").
3. The Buyer and Seller acknowledge and agree that the failure of Seller to
sell and deliver GNMA Securities to the Buyer on the Closing Date
constitutes a breach of a material covenant of the Commitment Letter, and
an Event of Default (the "BREACH AND DEFAULT") under each of the GNMA
Repurchase Agreement and the FHA Repurchase Agreement (the Commitment
Letter, the GNMA Repurchase Agreement and the FHA Repurchase Agreement are
collectively referred to as the "OPERATIVE AGREEMENTS"), and without
waiving any of its rights or remedies under the Operative Agreements, the
Buyer has consummated the Transaction with respect to the FHA Loans as
contemplated under the FHA Repurchase Agreement. Without waiving any of
its rights or remedies under the
<PAGE>
Operating Agreements, the Buyer shall refrain from exercising any of its
rights or remedies under the Operative Agreements in connection with the
Breach and Default until January 27, 1995.
4. Seller hereby agrees to deliver to the Buyer GNMA Securities in accordance
with the requirements of the Commitment Letter and the GNMA Repurchase
Agreement on or before January 27, 1995.
5. In the event that Seller fails to perform the covenant set forth in
paragraph 4 above, Buyer may exercise all rights and remedies available to
it pursuant to the Operative Agreements, provided that an Event of Default
shall be deemed to have occurred and all notice requirements with respect
thereto shall be deemed to have been given as of the Closing Date.
6. THE SELLER SHALL KEEP CONFIDENTIAL AND SHALL NOT DIVULGE TO ANY PARTY THE
SUBSTANCE OF THIS LETTER, WITHOUT THE WRITTEN CONSENT OF THE BUYER, EXCEPT
TO THE EXTENT THAT IT IS NECESSARY FOR THE SELLER TO DO SO IN WORKING WITH
LEGAL COUNSEL, AUDITORS, TAXING AUTHORITIES OR OTHER GOVERNMENTAL AGENCIES.
IN THE EVENT THAT THE BUYER DIVULGES TO ANY PARTY THE SUBSTANCE OF THIS
LETTER, THE BUYER SHALL KEEP CONFIDENTIAL AND SHALL NOT DIVULGE TO ANY
PARTY THE FACT THAT THE SELLER IS A PARTY TO THIS LETTER, WITHOUT THE
WRITTEN CONSENT OF THE SELLER, EXCEPT TO THE EXTENT THAT IT IS NECESSARY
FOR THE SELLER TO DO SO IN WORKING WITH LEGAL COUNSEL, AUDITORS, TAXING
AUTHORITIES OR OTHER GOVERNMENTAL AGENCIES.
7. Capitalized terms used and not defined herein shall have the respective
meanings assigned to them in the Operative Agreements.
8. This letter shall survive the Closing Date and shall not merge into the
closing documents but instead shall be independently enforceable by the
parties hereto.
9. This letter shall not be assigned by the Seller without the prior written
consent of the Buyer, which consent shall be granted or withheld in the
sole discretion of the Buyer.
10. This letter may be executed in any number of counterparts each of which
shall constitute one and the same instrument, and either party hereto may
execute this letter by signing any such counterpart.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
<PAGE>
11. THIS LETTER SHALL BE DEEMED IN EFFECT WHEN A FULLY EXECUTED COUNTERPART
THEREOF IS RECEIVED BY THE BUYER IN THE STATE OF NEW YORK AND SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THIS LETTER SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK EXCEPT TO
THE EXTENT PREEMPTED BY FEDERAL LAW.
Very truly yours,
GERMAN AMERICAN CAPITAL
CORPORATION
By: /s/ Charlene S. Chai
-----------------------------------
Name: Charlene S. Chai
----------------------------------
Title: Vice President
--------------------------------
Accepted and Agreed:
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
----------------------------------------------
Name: Jay R. Cohen
--------------------------------------------
Title: Executive Vice President
--------------------------------------------
<PAGE>
Exhibit 4(ll)
<PAGE>
GERMAN AMERICAN CAPITAL CORPORATION
31 WEST 52ND STREET
NEW YORK, NEW YORK 10019
As of January 27, 1995
CRIIMI MAE Inc.
11200 Rockville Pike
Rockville, MD 20852
Re: Sale by CRIIMI MAE Inc. (the "SELLER") of certain FHA mortgage
loans (the "FHA LOANS") and certain GNMA securities (the "GNMA
SECURITIES") to German American Capital Corporation (the "BUYER")
Ladies and Gentlemen:
In connection with the above-referenced transaction, and in
consideration of the mutual agreements hereinafter set forth, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Buyer and the Seller hereby agree as follows:
1. On the date hereof (the "CLOSING DATE") the Seller has sold certain GNMA
Securities to the Buyer pursuant to that certain Committed Master
Repurchase Agreement, dated as of January 23, 1995, by and between the
Seller and the Buyer (the "GNMA REPURCHASE AGREEMENT").
2. On the Closing Date the Seller has failed to sell GNMA Securities in an
amount required pursuant to that certain Commitment Letter, by Buyer to
Seller, dated as of January 19, 1995 (the "COMMITMENT LETTER") and the GNMA
Repurchase Agreement, such that percentages of GNMA Securities and FHA
Loans sold pursuant to that certain Committed Master Repurchase Agreement
Governing Purchases and Sales of Participation Certificates, dated as of
January 23, 1995, by and between the Seller and the Buyer (the "FHA
REPURCHASE AGREEMENT") fail to comply with the required percentages of the
aggregate outstanding principal balance of the Facility as specified in
Paragraph 3 of the Commitment Letter as follows: (a) the current percentage
of FHA Loans under the Facility is not in excess of 75% and (b) the current
percentage of GNMA Securities under the Facility is not less than 25% (the
percentages set forth in (a) and (b), each a "CURRENT PERCENTAGE").
3. The Buyer and Seller acknowledge and agree that the failure described in
paragraph 2 above, constitutes a breach of a material covenant of the
Commitment Letter, and an Event of Default (the "BREACH AND DEFAULT") under
each of the GNMA Repurchase
<PAGE>
Agreement and the FHA Repurchase Agreement (the Commitment Letter, the GNMA
Repurchase Agreement and the FHA Repurchase Agreement are collectively
referred to as the "OPERATIVE AGREEMENTS"), and without waiving any of its
rights or remedies under the Operative Agreements, the Buyer has
consummated the Transaction with respect to the GNMA Securities as
contemplated under the GNMA Repurchase Agreement. Without waiving any of
its rights or remedies under the Operative Agreements, the Buyer shall
refrain from exercising any of its rights or remedies under the Operative
Agreements in connection with the Breach and Default for a period of one
hundred twenty (120) days following the Closing Date (the "WAIVER PERIOD");
provided that during the Waiver Period, (a) the percentage of FHA Loans
does not exceed the Current Percentage of FHA Loans, and the percentage of
GNMA Securities does not fall below the Current Percentage of GNMA
Securities and (b) the Collateral Amount Percentage with respect to the
GNMA Repurchase Agreement and the FHA Repurchase Agreement shall be at
least 106%, respectively.
4. Seller hereby agrees to cure the Breach and Default in accordance with the
requirements of the Operative Agreements on or before one hundred twenty
(120) days following the Closing Date. After the Seller cures the Breach
and Default the Collateral Amount Percentage with respect to the GNMA
Repurchase Agreement and the FHA Repurchase Agreement shall conform to the
requirements of the Operative Agreements.
5. In the event that Seller fails to perform the covenant set forth in
paragraph 4 above, Buyer may exercise all rights and remedies available to
it pursuant to the Operative Agreements, provided that an Event of Default
shall be deemed to have occurred and all notice requirements with respect
thereto shall be deemed to have been given as of the Closing Date.
6. THE SELLER SHALL KEEP CONFIDENTIAL AND SHALL NOT DIVULGE TO ANY PARTY THE
SUBSTANCE OF THIS LETTER, WITHOUT THE WRITTEN CONSENT OF THE BUYER, EXCEPT
TO THE EXTENT THAT IT IS NECESSARY FOR THE SELLER TO DO SO IN WORKING WITH
LEGAL COUNSEL, AUDITORS, TAXING AUTHORITIES OR OTHER GOVERNMENTAL AGENCIES.
IN THE EVENT THAT THE BUYER DIVULGES TO ANY PARTY THE SUBSTANCE OF THIS
LETTER, THE BUYER SHALL KEEP CONFIDENTIAL AND SHALL NOT DIVULGE TO ANY
PARTY THE FACT THAT THE SELLER IS A PARTY TO THIS LETTER, WITHOUT THE
WRITTEN CONSENT OF THE SELLER, EXCEPT TO THE EXTENT THAT IT IS NECESSARY
FOR THE SELLER TO DO SO IN WORKING WITH LEGAL COUNSEL, AUDITORS, TAXING
AUTHORITIES OR OTHER GOVERNMENTAL AGENCIES.
7. Capitalized terms used and not defined herein shall have the respective
meanings assigned to them in the Operative Agreements.
8. This letter shall survive the Closing Date and shall not merge into the
closing documents but instead shall be independently enforceable by the
parties hereto.
9. This letter shall not be assigned by the Seller without the prior written
consent of the Buyer, which consent shall be granted or withheld in the
sole discretion of the Buyer.
<PAGE>
10. This letter may be executed in any number of counterparts each of which
shall constitute one and the same instrument, and either party hereto may
execute this letter by signing any such counterpart.
[SIGNATURES COMMENCE ON FOLLOWING PAGE]
<PAGE>
11. THIS LETTER SHALL BE DEEMED IN EFFECT WHEN A FULLY EXECUTED COUNTERPART
THEREOF IS RECEIVED BY THE BUYER IN THE STATE OF NEW YORK AND SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THIS LETTER SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK EXCEPT TO
THE EXTENT PREEMPTED BY FEDERAL LAW.
Very truly yours,
GERMAN AMERICAN CAPITAL
CORPORATION
By: /s/ John H. Cutting, III
---------------------------------------
Name: John H. Cutting III
-------------------------------------
Title: Director
------------------------------------
By: /s/ Charlene S. Chai
---------------------------------------
Name: Charlene S. Chai
-------------------------------------
Title: Vice President
------------------------------------
Accepted and Agreed:
CRIIMI MAE INC.
By: /s/ Jay R. Cohen
---------------------------------------
Name: Jay R. Cohen
--------------------------------------
Title: Executive Vice President
-------------------------------------
<PAGE>
EXHIBIT 4
AUTHORIZED REPRESENTATIVES
A. Of Depositor:
NAME SPECIMEN SIGNATURE
1. Jay R. Cohen _____________________________________
2. Cynthia O. Azzara _____________________________________
3. Nancy E. Currier _____________________________________
4. Peter M. Smith _____________________________________
5. Jamie I. Sapp _____________________________________
(continued at bottom of page)
B. Of Purchaser:
NAME SPECIMEN SIGNATURE
1. Joseph G. Kilely _____________________________________
2. -- _____________________________________
3. Charlene S. Chai _____________________________________
4. Elizabeth Stone _____________________________________
5. John H. Cutting _____________________________________
C. Of Custodian:
NAME SPECIMEN SIGNATURE
1. Suzanne J. MacDonald, VP _____________________________________
2. Douglas M. Badaszewski, AVP _____________________________________
3. David M.D. Caspar, AS _____________________________________
4. _____________________________________
5. _____________________________________
A. Of Depositor: (Continued)
6. H. William Willoughby _____________________________________
7. William B. Dockser _____________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
1994 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 5,143
<SECURITIES> 896,448
<RECEIVABLES> 9,097
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 955,050
<CURRENT-LIABILITIES> 0
<BONDS> 627,248
<COMMON> 262
0
0
<OTHER-SE> 249,780
<TOTAL-LIABILITY-AND-EQUITY> 955,050
<SALES> 0
<TOTAL-REVENUES> 84,441
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 19,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39,245
<INCOME-PRETAX> 26,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,010
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 0
</TABLE>
