PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED JUNE 6, 1997
CRIIMI MAE Inc.
150,000 Shares
Series C Cumulative Convertible Preferred Stock
CRIIMI MAE Inc. ("CRIIMI MAE" or the "Company") is a full service
commercial mortgage company structured as a self-administered real estate
investment trust ("REIT"). CRIIMI MAE is offering hereby 150,000 shares of
its Series C Cumulative Convertible Preferred Stock, par value $.01 per share
(the "Series C Preferred Shares"). The offering price per Series C Preferred
Share is $100.00.
Subject to certain restrictions, the Series C Preferred Shares are
convertible into shares of CRIIMI MAE's common stock, par value $.01 per share
(the "Common Shares"). CRIIMI MAE's Common Shares are listed on the New York
Stock Exchange ("NYSE") under the symbol "CMM." The reported last sale price
of the Common Shares as reported on the NYSE Composite Tape on September 16,
1997, was $16.75 per share.
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SEE "RISK FACTORS" AT PAGE S-2 FOR CERTAIN FACTORS RELEVANT
TO AN INVESTMENT IN SERIES C PREFERRED SHARES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Underwriting
Price to Discounts and Proceeds to
Public Commissions CRIIMI MAE(1)
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Per Series C Preferred Share,
$0.01 par value $ 100.00 (2) $ 100.00
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Total Series C Preferred Shares $15,000,000 (2) $15,000,000
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(1) Before deducting expenses payable by CRIIMI MAE estimated at $20,000.00.
Additionally, does not include a total of $450,000 to acquire and
exercise an option pursuant to which all of such shares are being sold.
(2) Not applicable.
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All of the Series C Preferred Shares offered hereby are being sold
directly by CRIIMI MAE to a European institutional investor upon the exercise
of a put option that CRIIMI MAE acquired from such European institutional
investor on March 31, 1997. In connection with this offering, CRIIMI MAE will
pay $450,000 to exercise such put option. CRIIMI MAE has not made any
underwriting arrangements with respect to the Series C Preferred Shares.
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The date of this Prospectus Supplement is September 22, 1997<PAGE>
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CRIIMI MAE
CRIIMI MAE is a full service commercial mortgage company structured as a
self-administered real estate investment trust ("REIT"). CRIIMI MAE's
portfolio of assets consists primarily of non-investment grade subordinated
securities backed by first mortgage loans on multifamily and other commercial
real estate ("Subordinated CMBS") and interests in government insured or
guaranteed mortgages secured by multifamily housing complexes located
throughout the United States. CRIIMI MAE believes that its concentration on
acquiring Subordinated CMBS and originating commercial mortgage loans for its
own securitization program, together with its expertise as an underwriter and
servicer, enable CRIIMI MAE to take advantage of the rapid growth in the
securitization of debt backed by income-producing commercial real estate.
CRIIMI MAE is one of the largest publicly traded REITs focused primarily on
the acquisition of Subordinated CMBS. In addition, CRIIMI MAE provides certain
servicing functions, including acting as the special servicer for the
commercial mortgage loans underlying its Subordinated CMBS portfolio, with
respect to commercial mortgage assets totaling approximately $10 billion as of
September 1, 1997.
RECENT DEVELOPMENTS
In July 1997, the Company purchased Subordinated CMBS in two transactions
having a combined face value in excess of $74 million. The two transactions,
Mortgage Capital Funding, Inc. Multifamily/Commercial Mortgage Pass-Through
Certificates, Series 1997-MCI and Morgan Stanley Capital I Inc. Commercial
Pass-Through Certificates, Series 1997-WFI, required a total equity investment
by the Company of approximately $17 million, with the remaining portion of the
$50 million purchase price obtained through financing.Additionally, on July
29, 1997, the Company purchased, through the secondary market, CMBS with a
face value of $106 million through Nomura's Asset Securitization Corp., Series
1995-MDIV. The purchase price of $58 million was funded with approximately
$16 million in cash and the balance through financing.
On September 8, 1997, the Company announced its intention to purchase
Subordinated CMBS, with a face value of approximately $211 million, for a
purchase price of approximately $159 million. The Company expects that the
purchases, comprised of two secondary market transactions and one primary
market transaction, will close by mid-October 1997.
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RISK FACTORS
Before investing in the Series C Preferred Shares offered hereby,
prospective investors should give special consideration to the information set
forth below, in addition to the information set forth elsewhere in this
Prospectus Supplement and in the accompanying Prospectus.
SUBORDINATED CMBS
The Subordinated CMBS tranches owned by CRIIMI MAE provide credit support
to the more senior tranches of the related commercial securitization. Cash
flow from the underlying mortgages generally is allocated first to the senior
tranches, with the most senior tranche having a priority right to cash flow.
Then, any remaining cash flow is allocated generally 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 most subordinate tranche will be the first to bear this loss. To
the extent there are losses in excess of the most subordinate tranche's stated
right to principal and interest, then the remaining tranches will bear such
losses in order of their relative subordination.
CRIIMI MAE's estimated returns on its Subordinated CMBS are based upon a
number of assumptions that are subject to certain business and economic
uncertainties and contingencies. Examples of these include the prevailing
interest rates on that portion of the Subordinated CMBS which has been
financed with floating rate debt, interest payment shortfalls due to
delinquencies on the underlying mortgage loans, the ability to renew
repurchase agreements and the terms of any such renewed agreements and the
availability of alternative financing. Further examples include the timing and
magnitude of credit losses on the mortgage loans underlying the Subordinated
CMBS that are a result of the general condition of the real estate market
(including competition for tenants and their related credit quality) and
changes in market rental rates.
In addition, CRIIMI MAE's ability to achieve its stated goal to increase
recurring earnings through the acquisition of additional Subordinated CMBS is
subject to a number of assumptions that are currently subject to certain
business and economic uncertainties and contingencies, including, without
limitation, continued availability of a sufficient volume of CMBS, higher
purchase prices for Subordinated CMBS and increased competition among
purchasers of Subordinated CMBS.
LEVERAGE
Fluctuations in interest rates will impact the value of CRIIMI MAE's
mortgage assets and could impact potential returns to stockholders through
increased cost of funds on CRIIMI MAE's floating rate debt. However, as of
September 1, 1997, 100% of CRIIMI MAE's outstanding floating rate debt was
hedged with interest rate cap agreements that have a weighted average strike
price of 6.4%, which partially limit the impact of rising interest rates on
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CRIIMI MAE's remaining floating rate debt. When CRIIMI MAE's cap agreements
expire, it may have interest rate risk to the extent interest rates increase
on any floating rate borrowings unless the caps are replaced or other steps
are taken to mitigate this risk. It is CRIIMI MAE's policy to hedge at least
75% of its floating rate debt.
CRIIMI MAE's ability to use leverage depends upon, among other things,
the amount of its unencumbered assets, which is linked to prevailing interest
rates and changes in the credit quality of encumbered assets underlying
existing debt. In certain circumstances, including, among other things,
increases in interest rates, changes in market spreads, or decreases in credit
quality of underlying assets, CRIIMI MAE would be required to provide
additional collateral in connection with its short term, floating rate debt
arrangements. From time to time, CRIIMI MAE has been required to fund such
additional collateral needs. In each instance and currently, CRIIMI MAE has
had adequate unencumbered assets to meet its operating, investing and
financing requirements, and management continually monitors the levels of
unencumbered assets.
CRIIMI MAE's ability to achieve its objectives depends not only on its
ability to borrow money in sufficient amounts and on favorable terms but also
on its ability to renew or replace on a continuous basis its maturing short
term borrowings. CRIIMI MAE's business strategy relies in part on short term
borrowings to fund acquisitions of long term mortgage assets including
Subordinated CMBS. If CRIIMI MAE is unable to fund additional collateral needs
as discussed above, or renew or replace maturing borrowings, CRIIMI MAE could
be required to sell, under adverse market conditions, a portion of its
mortgage assets, and could incur losses as a result. Furthermore, no active
secondary market for Subordinated CMBS currently exists and there can be no
assurance that one will develop, thereby limiting CRIIMI MAE's ability to
dispose of its Subordinated CMBS in such situations. Also, if CRIIMI MAE is
unable to complete additional resecuritizations or other refinancings of its
Subordinated CMBS, the Company would be required to rely more heavily on short
term borrowings, such as repurchase agreements or other sources of financing,
which may be on less favorable terms.
INVESTMENT COMPANY ACT RISK
CRIIMI MAE intends to conduct its business so as not to become regulated
as an investment company under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Investment Company Act exempts entities
that are "primarily engaged in the business of purchasing or otherwise
acquiring mortgages and other liens on and interests in real estate"
("Qualifying Interests"). Under current interpretation by the staff of the
Securities and Exchange Commission ("SEC"), to qualify for this exemption,
CRIIMI MAE, among other things, must maintain at least 55% of its assets in
Qualifying Interests. CRIIMI MAE will generally acquire Subordinated CMBS only
when such mortgage assets are collateralized by pools of first mortgage loans,
when CRIIMI MAE can monitor the performance of the underlying mortgage loans
through loan management and servicing rights, and when CRIIMI MAE has
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appropriate workout/foreclosure rights with respect to the underlying mortgage
loans. When such arrangements exist, CRIIMI MAE believes that the related
Subordinated CMBS constitute Qualifying Interests for purposes of the
Investment Company Act. Therefore, CRIIMI MAE believes that it should not be
required to register as an "investment company" under the Investment Company
Act as long as it continues to invest primarily in such Subordinated CMBS
and/or in other Qualifying Interests. However, if the SEC or its staff were to
take a different position with respect to whether CRIIMI MAE's Subordinated
CMBS constitute Qualifying Interests, CRIIMI MAE could be required to modify
its business plan so that it would not be required to register as an
investment company or to comply with the Investment Company Act by registering
as an investment company, either of which may adversely affect the Company.
CERTAIN TAX CONSIDERATIONS
REIT Status. CRIIMI MAE has qualified and intends to continue to qualify
as a REIT under Sections 856-860 of the U.S. Internal Revenue Code of 1986, as
amended (the "Code"). Although CRIIMI MAE believes that it has operated and
will continue to operate in such a manner, no assurance can be given that the
Company was organized or has operated, or will be able to continue to operate,
in a manner which will allow it to qualify as a REIT. As a REIT, the Company
does not pay taxes at the corporate level. Qualification for treatment as a
REIT requires the Company to satisfy numerous requirements (some on an annual
and others on a quarterly basis) established under highly technical and
complex Code provisions for which there are only limited judicial and
administrative interpretations, and involves the determination of various
factual matters and circumstances not entirely within CRIIMI MAE's control.
For example, to qualify as a REIT, at least 95% of CRIIMI MAE's gross income
in any year must be derived from qualifying sources, and the Company must pay
distributions to stockholders aggregating annually at least 95% of its taxable
income (determined without regard to the dividends paid deduction and by
excluding net capital gains) minus any excess noncash income (certain amounts
that a REIT is required to include in income in advance of receiving cash). No
assurance can be given that legislation, new regulations, administrative
interpretations or court decisions will not significantly change the tax laws
with respect to qualification as a REIT or the U.S. federal income tax
consequences of such qualification. See "Certain United States Federal Income
Tax Considerations" and "Legal Matters."
If CRIIMI MAE were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates and
would not be allowed a deduction in computing its taxable income for amounts
distributed to its stockholders. Moreover, unless entitled to relief under
certain statutory provisions, CRIIMI MAE also would be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of the
Company available for investment or distribution to stockholders because of
the additional tax liability to CRIIMI MAE for the years involved. In
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addition, distributions to stockholders would no longer be required to be
made. See "Certain United States Federal Income Tax
Considerations--Qualification As a REIT."
Even if CRIIMI MAE maintains its REIT status, it may be subject to
certain federal, state and local taxes on its income. For example, if CRIIMI
MAE has net income from a prohibited transaction, such income will be subject
to a 100% tax. In addition, any net income earned by CRIIMI MAE Services
Limited Partnership (the "Services Partnership") that is allocated to its
limited partner CRIIMI MAE Services, Inc. (the "Services Corporation") is
subject to federal income tax at regular corporate tax rates. See "Certain
United States Federal Income Tax Considerations--Income Tax Consequences to
CRIIMI MAE."
Section 305(c) of the Code and the Treasury regulations thereunder treat
as a dividend certain constructive distributions of stock with respect to
preferred stock. Certain adjustments to the conversion price of the Series C
Preferred Shares may be treated as dividends to holders of such shares.
Conversely, the failure to make certain adjustments to the conversion price to
reflect certain events may result in a taxable dividend to other stockholders.
Special Tax Considerations for Tax-Exempt and Non-U.S. Investors. CRIIMI
MAE has issued debt instruments that might cause CRIIMI MAE to be treated as a
taxable mortgage pool ("TMP") under section 7701(i) of the Code. As a result,
a portion of the ordinary or capital gains dividends received by tax-exempt
and non-U.S. stockholders may be characterized as "excess inclusion" income.
In the case of tax-exempt stockholders, any such excess inclusion income will
be considered unrelated business taxable income ("UBTI") under the Code. In
the case of non-U.S. stockholders, any such excess inclusion income will be
subject to 30% withholding (unless such income is effectively connected with a
U.S. trade or business) and such withholding will not be eligible for
reduction under income tax treaties. Similar considerations will apply to any
tax-exempt entities or non-U.S. investors owning interests in mutual funds
that own Common Shares. See "Certain United States Federal Income Tax
Considerations--Taxation of Non-U.S. Holders" and "Certain United States
Federal Income Tax Considerations--Taxation of Tax-Exempt Stockholders."
Dividend Payments to Stockholders. As discussed above, CRIIMI MAE is
required to distribute annually at least 95% of its tax basis income to
stockholders in order to maintain its REIT status. Because the Company
typically distributes an amount approximately equal to its tax basis income,
the Company's dividend rate may be subject to fluctuations. See "Price Range
of Common Shares and Dividends."
FUTURE REVISIONS IN POLICIES AND STRATEGIES AT THE DISCRETION OF THE BOARD OF
DIRECTORS
CRIIMI MAE's Board of Directors has established CRIIMI MAE's acquisition
and operating policies and strategies. Any such policies or strategies may be
modified or waived by the Board of Directors without stockholder consent.
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USE OF PROCEEDS
CRIIMI MAE intends to use the net proceeds from the sale of the Series C
Preferred Shares offered hereby (i) to acquire mortgage assets, primarily
Subordinated CMBS, (ii) to sponsor and/or participate in collateralized
mortgage obligation programs and (iii) for other general corporate purposes,
including working capital. Pending their use for the foregoing purposes, the
net proceeds are expected to be invested in short-term, interest-bearing
accounts and/or used to pay down debt on a temporary basis.
PRICE RANGE OF COMMON SHARES AND DIVIDENDS
The Common Shares are traded on the NYSE under the symbol "CMM." The
table below sets forth the high and the low closing sales prices per Common
Share as reported on the NYSE Composite Tape and the amount of cash dividends
paid per Common Share during the periods indicated. As of September 16,
1997, there were approximately 27,000 holders of record of Common Shares.
Price Range of
Common Shares Dividends Paid
-------------- per Share
High Low
Year Ended December 31, 1995:
1st Quarter $8 3/8 $ 6 3/4..............$0.225
2nd Quarter 8 3/4 7 1/8.............. 0.225
3rd Quarter 8 1/2 7 3/4.............. 0.235
4th Quarter 9 1/4 8 1/8............. 0.235
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$0.920
Year Ended December 31, 1996:
1st Quarter $10 1/2 $8 5/8 ................$0.30
2nd Quarter 11 10 .................0.30
3rd Quarter 11 1/8 10 1/4................ 0.30
4th Quarter 13 1/8 10 3/4................ 0.32
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$1.22
Year Ended December 31, 1997:
1st Quarter $18 1/8 12 3/4.................$0.35
2nd Quarter 16 5/8 13 7/8..................0.35
3rd Quarter (through
September 16, 1997) 17 9/16 15 11/16
The reported last sale price of the Common Shares as reported on the NYSE
Composite Tape on September 16, 1997, was $16.75 per share. CRIIMI MAE
intends to continue to pay quarterly dividends to holders of Common Shares.
Future dividends will be at the discretion of the Board of Directors and will
depend on the actual cash available for distribution, CRIIMI MAE's financial
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condition, capital requirements, credit agreement restrictions, the
distribution requirements under the REIT provisions of the Code, and such
other factors as CRIIMI MAE's Board of Directors deem relevant. See "Risk
Factors--Certain Tax Considerations--Dividend Payments to Stockholders."
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth CRIIMI MAE's consolidated ratios of (i)
earnings to fixed charges and (ii) earnings to combined fixed charges and
preferred stock dividends for the periods shown:
Six Months
Years Ended December 31, Ended June 30,
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1992 1993 1994 1995 1996 1996 1997
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Ratio of earnings
to fixed charges 1.69 1.48 1.66 1.35 1.50 1.57 1.74
Ratio of earnings to
combined fixed
charges and
preferred stock
dividends* 1.69 1.48 1.66 1.35 1.47 1.57 1.68
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*Prior to the offering of Series A Cumulative Convertible Preferred Stock on
July 1, 1996, CRIIMI MAE did not have any issued or outstanding preferred
stock.
For purposes of computing these ratios, earnings consist of CRIIMI MAE's
consolidated net income, plus fixed charges, extraordinary items, loss from
investment in limited partnerships and dividends on preferred stock. Fixed
charges and preferred stock dividends consist of gross interest cost,
including amortization of debt expense, discount or premium and adjustment to
hedges for valuation and sales, and preferred stock dividends.
DESCRIPTION OF SERIES C PREFERRED SHARES
CRIIMI MAE is authorized to issue 25 million shares of preferred stock,
par value $.01 per share. The Board of Directors of CRIIMI MAE (the "Board")
has authorized the issuance of up to 300,000 Series C Preferred Shares. To
date, CRIIMI MAE has not issued any Series C Preferred Shares.
The following description of the Series C Preferred Shares sets forth
certain general terms and provisions of the Series C Preferred Shares. The
statements below describing the Series C Preferred Shares are in all respects
subject to and qualified in their entirety by reference to the applicable
provisions of CRIIMI MAE's Articles of Incorporation, as amended (the
"Articles of Incorporation"), and CRIIMI MAE's Articles Supplementary to the
Articles of Incorporation relating to the Series C Preferred Shares (the
"Articles Supplementary").
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DESIGNATION AND NUMBER
The number of shares initially constituting the Series C Preferred Shares
is 300,000, which number the Board may decrease (but not increase) without a
vote of the holders of Series C Preferred Shares. The Board may not, however,
decrease the number of Series C Preferred Shares below the number of then
outstanding Series C Preferred Shares.
RANK
The Series C Preferred Shares will, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of CRIIMI MAE, rank (i)
senior to the Common Shares and to all other capital stock of CRIIMI MAE the
terms of which specifically provide that such capital stock ranks junior to
the Series C Preferred Shares with respect to dividend rights or rights upon
liquidation, dissolution or winding up of CRIIMI MAE; (ii) on a parity with
all capital stock of CRIIMI MAE the terms of which specifically provide that
such capital stock ranks on a parity with the Series C Preferred Shares with
respect to dividend rights or rights upon liquidation, dissolution or winding
up of CRIIMI MAE; and (iii) junior to shares of CRIIMI MAE Series B Cumulative
Convertible Preferred Stock and all other capital stock of CRIIMI MAE the
terms of which specifically provide that such capital stock ranks senior to
the Series C Preferred Shares with respect to dividend rights or rights upon
liquidation, dissolution or winding up of CRIIMI MAE.
DIVIDENDS
Holders of Series C Preferred Shares will be entitled to receive, when,
as and if declared by the Board, out of assets of CRIIMI MAE legally available
for payment, cumulative cash dividends payable quarterly on the last business
day of each calendar quarter of each year (each, a "Quarterly Dividend Payment
Date"), at an annual rate equal to the sum of (a) 75 basis points plus (b)
LIBOR (as defined below) as of the second LIBOR Market Day (as defined below)
preceding the commencement of the calendar quarter which includes such
Quarterly Dividend Payment Date. As used in this paragraph (i) the term
"LIBOR" means the arithmetic mean of the offered rates for three-month
deposits in United States dollars which appear on the display designated as
"Page 3750" on the 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) (the "Telerate Screen Page 3750") as of 11:00 A.M.,
London time, on the specified LIBOR Market Day; provided, however, that if at
the specified time on the specified LIBOR Market Day fewer than two such
offered rates so appear on the Telerate Screen Page 3750, LIBOR shall mean the
arithmetic mean of three offered rates to prime banks for three-month deposits
in United States dollars by three major banks in the London interbank market,
as selected by CRIIMI MAE at approximately 11:00 A.M., London time, on the
specified LIBOR Market Day; provided, further, that if fewer than three major
banks in the London interbank market are quoting rates to prime banks for
three-month deposits in United States dollars, LIBOR shall be the LIBOR in
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effect for the previous quarterly dividend period and (ii) the term "LIBOR
Market Day" means any day on which commercial banks are open for business
(including dealings in foreign exchange and foreign currency deposits) in
London, England. Dividends will be cumulative from and after the date of
issuance. Each such dividend shall be payable to holders of record as they
appear on the share transfer books of CRIIMI MAE on such record dates as shall
be fixed by the Board. Each quarterly dividend, to the extent not paid on the
applicable Quarterly Dividend Payment Date, shall accrue (whether or not
earned or declared) on a daily basis additional cumulative dividends at the
then applicable dividend rate for the Series C Preferred Shares.
No dividends will be declared or paid or set apart for payment (other
than in Common Shares or other capital stock of CRIIMI MAE ranking junior to
the Series C Preferred Shares as to dividends and upon liquidation) on any
class or series of capital stock ranking, as to dividends, on a parity with or
junior to the Series C Preferred Shares for any period unless full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Series C Preferred Shares for all past dividend periods and the then current
dividend period. When dividends are not paid in full (or a sum sufficient for
such full payment is not so set apart) upon the Series C Preferred Shares and
the shares of any other class or series of capital stock ranking on a parity
as to dividends with the Series C Preferred Shares, all dividends declared
upon the Series C Preferred Shares and any other series of capital stock
ranking on a parity as to dividends with the Series C Preferred Shares shall
be declared pro rata so that the amount of dividends declared per Series C
Preferred Share and such other series of capital stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the Series C
Preferred Shares and such other series of capital stock bear to each other.
Unless full cumulative dividends on the Series C Preferred Shares have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment on the Series C
Preferred Shares for all past dividend periods and the then current dividend
period, CRIIMI MAE may not redeem, purchase or otherwise acquire for any
consideration (or pay to or make available money for a sinking fund for the
redemption of) any Common Shares, or any other capital stock of CRIIMI MAE
ranking junior to or on a parity with the Series C Preferred Shares as to
dividends or upon liquidation, dissolution or winding up (except by conversion
into, or exchange for other capital stock of CRIIMI MAE ranking junior to the
Series C Preferred Shares as to dividends and upon liquidation, dissolution or
winding up). Notwithstanding the foregoing, CRIIMI MAE shall not be
restricted from purchasing or acquiring any capital stock of CRIIMI MAE either
(i) to preserve the status of CRIIMI MAE as a REIT or (ii) pursuant to a
purchase or exchange offer made on comparable terms to all holders of
outstanding shares of capital stock of CRIIMI MAE.
Any dividend payment made on Series C Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due which remains
payable.
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REDEMPTION
From and after the first anniversary and until the second anniversary of
the date of issuance of the Series C Preferred Shares, the Series C Preferred
Shares will be subject to redemption at the option of CRIIMI MAE, in whole or
in part, at any time, for cash equal to $106.00 per share, together in each
case with an amount equal to accrued and unpaid dividends on such Series C
Preferred Shares to (and including) the date fixed for redemption. If fewer
than all of the outstanding Series C Preferred Shares are to be redeemed, the
number of shares to be redeemed will be determined by CRIIMI MAE and such
shares shall be redeemed pro rata from the holders of record of such shares in
proportion to the number of such shares held by such holders.
Notice of redemption will be mailed at least 45 days but not more than 60
days before the redemption date to each holder of record of Series C Preferred
Shares to be redeemed at the address shown on the share transfer books of
CRIIMI MAE. Each notice shall state: (i) the redemption date; (ii) the number
of Series C Preferred Shares to be redeemed; (iii) the redemption price; (iv)
the place or places where certificates for such Series C Preferred Shares are
to be surrendered for payment of the redemption price; (v) that dividends on
the shares to be redeemed will cease to accrue on such redemption date; and
(vi) the date upon which the conversion rights of the holders of Series C
Preferred Shares shall terminate. If notice of redemption of any Series C
Preferred Shares has been given and if the funds necessary for such redemption
have been set aside by CRIIMI MAE in trust for the benefit of the holders of
any Series C Preferred Shares so called for redemption, then from and after
the redemption date dividends will cease to accrue on such Series C Preferred
Shares, such Series C Preferred Shares shall no longer be deemed outstanding
and all rights of the holders of such shares will terminate, except the right
to receive the redemption price. Any moneys so set aside in trust which
remain unclaimed by the holders of the Series C Preferred Shares at the end of
two years after the redemption date will be returned by the trustee thereof to
CRIIMI MAE and the holders of such Series C Preferred Shares will be entitled
to look only to CRIIMI MAE for the payment thereof.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of CRIIMI MAE, then, before any distribution or payment shall
be made to the holders of any Common Shares or any other class or series of
capital stock of CRIIMI MAE ranking junior to the Series C Preferred Shares in
the distribution of assets upon any liquidation, dissolution or winding up of
CRIIMI MAE, the holders of Series C Preferred Shares shall be entitled to
receive out of assets of CRIIMI MAE legally available for distribution to
stockholders, liquidating distributions in the amount of $100.00 per share,
plus an amount equal to all dividends accrued and unpaid thereon. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Series C Preferred Shares will have no right or claim
to any of the remaining assets of CRIIMI MAE. In the event that, upon any
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such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of CRIIMI MAE are insufficient to pay the amount of the
liquidating distributions on all outstanding Series C Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of
capital stock of CRIIMI MAE ranking on a parity with the Series C Preferred
Shares in the distribution of assets upon liquidation, dissolution or winding
up, then the holders of the Series C Preferred Shares and all other such
classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders
of Series C Preferred Shares, the remaining assets of CRIIMI MAE shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to the Series C Preferred Shares upon liquidation, dissolution
or winding up, according to their respective rights and preferences and in
each case according to their respective number of shares. For such purposes,
the consolidation, merger or other business combination of CRIIMI MAE with or
into any other corporation, trust or entity, or the sale, lease or conveyance
of all or substantially all of the property or business of CRIIMI MAE, shall
not be deemed to constitute a liquidation, dissolution or winding up of CRIIMI
MAE.
VOTING RIGHTS
Holders of the Series C Preferred Shares will not have any voting rights,
except as set forth in the Articles Supplementary and summarized below, or as
otherwise from time to time required by law.
So long as any Series C Preferred Shares remain outstanding, CRIIMI MAE
will not, without the affirmative vote or consent of the holders of at least
two-thirds of the Series C Preferred Shares outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to the
Series C Preferred Shares with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of CRIIMI MAE into any such capital
stock, or create, authorize or issue any obligation or security convertible
into or evidencing the right to purchase any such capital stock; or (ii)
amend, alter or repeal the provisions of CRIIMI MAE's Articles of
Incorporation or the Articles Supplementary, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series C Preferred Shares or the
holders thereof; provided, however, with respect to the occurrence of any of
the Events set forth in (ii) above, so long as the Series C Preferred Shares
remain outstanding with the terms thereof materially unchanged, taking into
account that upon the occurrence of an Event, CRIIMI MAE may not be the
surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
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power of holders of Series C Preferred Shares, and provided further that (x)
any increase in the amount of the authorized Common Shares or Series C
Preferred Shares or the authorization, creation or issuance of any other class
or series of capital stock, or (y) any increase in the amount of authorized
shares of any other class or series of capital stock, in each case ranking on
a parity with or junior to the Series C Preferred Shares with respect to
payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
During any period in which dividends on the Series C Preferred Shares are
cumulatively in arrears for six or more quarterly dividend payments (whether
or not consecutive), then the number of directors constituting the Board
shall, without further action, be increased by two and the holders of the
Series C Preferred Shares, voting together as a single class (together with
any other series of preferred stock as described below), shall have, in
addition to their other voting rights, the right to elect the directors of
CRIIMI MAE to fill such newly created directorships. Such additional voting
rights shall continue until such time as all dividends accumulated on the
Series C Preferred Shares shall have been paid in full, at which time such
additional directors shall cease to be directors, subject to the rights of
other series of preferred stock to vote for the election of such additional
directors (as described below), and such additional voting right of the
holders of Series C Preferred Shares shall terminate subject to revesting in
the event of each and every subsequent event of the character indicated above.
In no event will holders of Series C Preferred Shares voting separately as a
class be entitled to elect a total of more than two directors.
If, at any time when the holders of Series C Preferred Shares are
entitled to elect directors (as described above), the holders of any one or
more other series of CRIIMI MAE preferred stock are entitled to elect
directors by reason of any default or event specified in the Articles of
Incorporation, as in effect at the time, or the articles supplementary for
such series, and if the terms for such other additional series so permit, then
the voting rights of the two or more series then entitled to vote shall be
combined (with each series having a number of votes proportional to the
aggregate liquidation preference of its outstanding shares). In such case,
the holders of Series C Preferred Shares and of all such other series then
entitled so to vote, voting together as one class, shall elect such directors.
If the holders of any such other series of CRIIMI MAE preferred stock have
elected such directors prior to the happening of the default or event
permitting the holders of Series C Preferred Shares to elect directors, then a
new election shall be held with all such other series of CRIIMI MAE preferred
stock and the holders of Series C Preferred Shares voting together as a single
class for such directors, resulting in the election of such new directors. If
the holders of any such other series of preferred stock are entitled to elect
in excess of two directors, the holders of Series C Preferred Shares shall not
participate in the election of more than two such directors, and those
directors whose terms first expire shall be deemed to be the directors elected
by the holders of Series C Preferred Shares.
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CONVERSION
From the date of issuance until the second anniversary thereof, the
holders of the Series C Preferred Shares may convert Series C Preferred Shares
into Common Shares; provided, that the minimum conversion amount at any one
time shall be 10,000 Series C Preferred Shares, and provided further that the
holders thereof shall not be permitted to convert more than 50,000 Series C
Preferred Shares in the aggregate during any 30 consecutive calendar day
period. Notwithstanding the foregoing, the "Institutional Investor" (as
defined below in "Plan of Distribution") has agreed with CRIIMI MAE that the
Institutional Investor shall not convert any Series C Preferred Shares into
Common Shares prior to October 23, 1997. Determination of which holders of
Series C Preferred Shares shall be entitled to convert during any 30
consecutive calendar day period shall be based upon the holders which first
deliver to CRIIMI MAE the conversion notice and certificates of Series C
Preferred Shares, with any allocation between holders delivering the required
conversion notice and certificates of Series C Preferred Shares on the same
day to be made pro rata based upon the number of Series C Preferred Shares
submitted for conversion. In the event a holder of Series C Preferred Shares
cannot effect a requested conversion of such holder's Series C Preferred
Shares at the time requested, CRIIMI MAE shall, without further action on the
part of such holder, convert such Series C Preferred Shares into Common Shares
on the earliest date that such conversion is possible under the terms of the
Articles Supplementary.
On the second anniversary of the date of issuance of the Series C
Preferred Shares, the Series C Preferred Shares shall be automatically
converted into Common Shares.
The number of Common Shares deliverable upon conversion of a Series C
Preferred Share shall be equal to a fraction (i) the numerator of which is
$100.00 and (ii) the denominator of which is a Closing Trade Price (as defined
below) for a trading day within the Conversion Pricing Period (as defined
below) mutually acceptable to CRIIMI MAE and the holder of such Series C
Preferred Share or, if no Closing Trade Price is mutually acceptable to CRIIMI
MAE and such holder, then the denominator shall be the Average Closing Trade
Price (as defined below) for the applicable period of twenty-one (or such
fewer number as shall be mutually agreed upon in writing by CRIIMI MAE and
such holder of the Series C Preferred Shares being converted) consecutive
trading days immediately preceding the date of delivery of a notice requesting
conversion or the second anniversary of the date of issuance of the Series C
Preferred Shares, as the case may be (each, a "Conversion Pricing Period").
For purposes of determining the conversion rate, "Average Closing Trade Price"
means the average of the closing trade prices for the Common Shares as
reported on the NYSE (or such other exchange on which the Common Shares are
then listed) for each day during the Conversion Pricing Period in which such
closing trade price exceeds 75% of the closing trade price for the Common
Shares on the last day of the applicable Conversion Pricing Period (unless
CRIIMI MAE and the holder of Series C Preferred Shares being converted agree
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in writing otherwise). As used in this paragraph, the term "Closing Trade
Price" means the last trade price for the Common Shares as reported on the
NYSE (or such other exchange on which the Common Shares are then listed) for
that trading day.
Upon conversion of any Series C Preferred Shares, all accrued and unpaid
dividends up to (and including) the date of optional or mandatory conversion,
whether or not declared, on each such share shall become immediately due and
payable in cash on the date of the issuance and delivery by CRIIMI MAE of the
certificate representing the Common Shares to which such holder of Series C
Preferred Shares being converted is entitled.
In connection with the conversion of any Series C Preferred Shares, no
fractions of Common Shares shall be issued, but in lieu thereof CRIIMI MAE
shall pay a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Average Closing
Trade Price for the applicable Conversion Pricing Period.
In the event of (a) any capital reorganization or reclassification of
outstanding Common Shares, (b) any consolidation or merger of CRIIMI MAE with
or into another person, or (c) any sale or conveyance to another person of the
property of CRIIMI MAE as an entirety or substantially as an entirety, the
holders of Series C Preferred Shares shall be entitled to receive the same
consideration or other distributions received by the holders of Common Shares,
on an as converted basis or, in certain cases, either (i) common stock in the
surviving entity or (ii) $106.00 in cash.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
As discussed in the Registration Statement under " Common
Shares Restrictions on Ownership and Transfer," for CRIIMI MAE to qualify as a
REIT under the Code, not more than 50% in value of its outstanding capital
stock may be owned, directly or constructively, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist CRIIMI MAE in meeting this requirement, CRIIMI MAE
may take certain actions to limit the beneficial ownership, directly or
indirectly, by a single person of more than 9.8% of CRIIMI MAE's outstanding
capital stock, including any Series C Preferred Shares.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following general discussion is a summary of certain U.S. federal
income and estate tax consequences of the ownership and disposition of the
Series C Preferred Shares, or the Common Shares into which such Series C
Preferred Shares are convertible (hereinafter collectively referred to as
"Capital Shares"), applicable to holders of such Capital Shares who acquire
and own such Capital Shares as capital assets within the meaning of section
1221 of the Code. For purposes of this discussion, a "Non-U.S. Holder" is a
person other than (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
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the laws of the United States or of any state, or (iii) an estate or trust
whose income is includable in gross income for United States federal income
tax purposes regardless of its source. For purposes of the withholding tax on
dividends discussed below, a non-resident fiduciary of an estate or trust will
be considered a Non-U.S. Holder.
This discussion does not consider specific facts and circumstances that
may be relevant to a particular holder's tax position (including the fact
that, in the case of a Non-U.S. Holder that is a partnership, the U.S. tax
consequences of holding and disposing of Capital Shares may be affected by
certain determinations made at the partner level), and does not consider U.S.
state and local or non-U.S. tax consequences. In addition, this discussion
does not discuss all of the aspects of United States federal income taxation
that may be relevant to a prospective stockholder in light of such
stockholder's particular circumstances or to certain types of stockholders
(including, but not limited to, insurance companies; certain tax-exempt
entities; financial institutions; broker/dealers; foreign corporations; and
employees and affiliates acquiring stock options) some of whom could be
subject to special treatment under United States federal income tax laws.
Furthermore, the following discussion is based on provisions of the Code and
administrative and judicial interpretations, all of which are subject to
change, possibly on a retroactive basis.
EACH PROSPECTIVE HOLDER OF CAPITAL SHARES IS URGED TO CONSULT ITS OWN TAX
ADVISOR WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
HOLDING AND/OR DISPOSING OF CAPITAL SHARES, AS WELL AS ANY TAX CONSEQUENCES
THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, LOCAL OR OTHER U.S. OR
NON-U.S. TAXING JURISDICTION.
The sections of the Code and Treasury Regulations governing REITs are
highly technical and complex. The following summary sets forth the material
aspects of the sections that govern the United States federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof.
Swidler & Berlin, Chartered has acted as tax counsel to CRIIMI MAE in
connection with the offering of Series C Preferred Shares described herein. In
the opinion of Swidler & Berlin, Chartered, commencing with CRIIMI MAE's
taxable year ending December 31, 1989, CRIIMI MAE has been organized in
conformity with the requirements for qualification as a REIT, and its proposed
method of operation has enabled it, and will enable it, to meet the
requirements for qualification and taxation as a REIT under the Code. It must
be emphasized that such opinion is based on various assumptions and is
conditioned upon certain representations made by CRIIMI MAE as to factual
matters related to the organization and operation of CRIIMI MAE. In addition,
such opinion is based upon the factual representations of CRIIMI MAE
concerning its business and assets as set forth in this Prospectus Supplement
and the accompanying Prospectus. Moreover, such qualification and taxation as
a REIT depends upon CRIIMI MAE's ability to meet (through actual annual
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operating results, distribution levels and diversity of stock ownership) the
various qualification tests imposed under the Code discussed below, the
results of which have not been and will not be reviewed by Swidler & Berlin,
Chartered. Accordingly, no assurance can be given that the actual results of
CRIIMI MAE's operation for any particular taxable year have satisfied or will
satisfy such requirements. Further, the anticipated tax treatment described in
this Prospectus Supplement and in the accompanying Prospectus may be changed,
perhaps retroactively, by legislative, administrative or judicial action at
any time.
GENERAL CONSIDERATIONS
CRIIMI MAE has qualified, and intends to continue to qualify, as a REIT
under the Code. Qualification for treatment as a REIT requires CRIIMI MAE to
meet certain criteria including certain requirements regarding the nature of
its ownership, assets, income and distributions of taxable income.
CRIIMI MAE has owned one hundred percent (100%) of the stock of CRIIMI,
Inc., CRIIMI MAE Financial Corporation, CRIIMI MAE Financial Corporation II,
CRIIMI MAE Financial Corporation III, CRIIMI MAE QRS I, Inc., CRIIMI MAE
Management, Inc. and CRIIMI MAE Holdings, Inc. (collectively, the "QRSs") at
all times the QRSs have been in existence. As a result, the QRSs are treated
as "qualified REIT subsidiaries." Code section 856(i) provides that a
corporation that is a qualified REIT subsidiary will not be treated as a
separate corporation and all assets, liabilities and items of income,
deduction and credit of a qualified REIT subsidiary will be treated as assets,
liabilities and such items (as the case may be) of the REIT for all purposes
of the Code including the REIT qualification tests. Thus, in applying the REIT
requirements described herein, the separate existence of the QRSs will be
ignored, and all assets, liabilities and items of income, deduction and credit
of the QRSs will be treated as assets, liabilities and such items (as the case
may be) of CRIIMI MAE. Because the QRSs will be treated as qualified REIT
subsidiaries, they will not be subject to United States federal income tax. In
addition, CRIIMI MAE's ownership of the voting stock of the QRSs will not
violate the restrictions against ownership of securities of any one issuer
which constitute more than ten percent (10%) of such issuer's voting
securities (discussed herein) or more than five percent (5%) of the value of
CRIIMI MAE's total assets (discussed herein).
QUALIFICATION AS A REIT
The Code imposes a number of technical requirements on REITs. Among these
are requirements that CRIIMI MAE be managed by one or more trustees or
directors, that beneficial ownership be held by at least one hundred (100)
persons, that CRIIMI MAE not be treated as closely held when attribution rules
are applied, that ownership of CRIIMI MAE be evidenced by transferrable
shares, and that CRIIMI MAE otherwise be taxable as a domestic corporation. In
addition, the Code strictly limits CRIIMI MAE in the assets it may own, the
sources from which it may earn income, and the distributions it may make to
stockholders.
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Assets Requirements. CRIIMI MAE is subject to a number of limitations on
the assets it may hold. First, at least seventy-five percent (75%) of the
value of CRIIMI MAE's assets must consist of real estate assets (including
shares in other REITs), cash and cash items (including receivables) and
government securities. Second, the value of any one issuer's securities owned
by CRIIMI MAE may not exceed five percent (5%) of the value of CRIIMI MAE's
total assets unless those securities qualify as real estate assets (including
shares of another REIT) or government securities. Third, CRIIMI MAE may not
own more than ten percent (10%) of any single issuer's outstanding voting
securities unless those securities qualify as real estate assets.
CRIIMI MAE believes that substantially all of its assets, other than its
ownership interest in the Services Corporation, are real estate assets or
government securities. Because CRIIMI MAE owns only nonvoting preferred stock
of the Services Corporation, CRIIMI MAE will not be considered to own more
than ten percent (10%) of the voting securities of the Services Corporation or
any other single issuer's outstanding voting securities, other than securities
which qualify as real estate assets. CRIIMI MAE does not believe that its
ownership of nonvoting preferred stock of the Services Corporation or the
ownership structure of the Services Partnership will cause the CRIIMI MAE to
be treated as owning voting securities of the Services Corporation. CRIIMI MAE
also believes that the aggregate value of the securities of any single issuer
(other than issuers whose securities qualify as real estate assets or
government securities) held by CRIIMI MAE have been and will continue to be
less than five percent (5%) of CRIIMI MAE's total assets.
Income Requirements. CRIIMI MAE also is subject to a series of
limitations on the income it may earn. Among these limitations are the
requirements that (i) at least seventy-five percent (75%) of CRIIMI MAE's
gross income derive from rents from real property, mortgage interest, gain
from sale of real property not held primarily for sale, dividends from other
REITs, gain from the sale of REIT shares, refunds and abatements of real
property taxes, income and gain from foreclosure property, commitment and
certain other fees, qualified temporary investment income, and gain from the
sale of certain other property; and (ii) at least ninety-five percent (95%) of
CRIIMI MAE's gross income be derived from the foregoing items plus other
dividends, interest and gain from the sale or other disposition of stocks and
securities.
Distribution Requirements. CRIIMI MAE also must comply with certain
distribution rules. Specifically, the deduction for dividends paid (computed
without regard to capital gain dividends) for the taxable year must equal or
exceed the sum of (i) ninety-five percent (95%) of CRIIMI MAE's taxable income
(computed without regard to distributions and excluding net capital gain), and
(ii) ninety-five percent (95%) of the excess of net income from foreclosure
property over the tax on such income; minus any excess noncash income.
Furthermore, a distribution by CRIIMI MAE will qualify for the dividends paid
deduction only if such dividend is not "preferential" (i.e., each holder of
Capital Shares must receive the same distribution per share).
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To protect CRIIMI MAE's qualification as a REIT under the Code, CRIIMI
MAE's Articles of Incorporation provide that no person or persons acting as a
group (defined to include partnerships, corporations, trusts and other
entities), with the exceptions of C.R.I., Inc. or its affiliates, shall at any
time directly or indirectly acquire ownership of more than 9.8% of the
outstanding capital stock of CRIIMI MAE.
INCOME TAX CONSEQUENCES TO CRIIMI MAE
A REIT generally is not subject to United States federal income tax on
that portion of its ordinary income and capital gains that is distributed
currently to stockholders. CRIIMI MAE has historically distributed
substantially all of its taxable income to stockholders. CRIIMI MAE intends to
continue to distribute a level of taxable income necessary to qualify as a
REIT. CRIIMI MAE will generally be subject to federal income tax at normal
corporate rates on its undistributed income and to a four percent (4%) excise
tax under the Code on the amount, if any, by which the sum of eighty-five
percent (85%) of its REIT taxable income (including accrued but unpaid
interest income), ninety-five percent (95%) of any net capital gain, and any
undistributed taxable income from prior periods exceed the amount actually
distributed to its stockholders during the year (or declared as a dividend
during October, November or December of a calendar year, if distributed during
the following January as ordinary income dividends).
Except as described below, the cash attributable to income accrued by
CRIIMI MAE for each quarter generally is received within thirty (30) days
after the end of the quarter, allowing CRIIMI MAE to distribute this income on
a current basis. In the case of instruments held by CRIIMI MAE that accrue
original issue discount ("OID") income, however, CRIIMI MAE will accrue income
currently but may not receive the cash attributable to such income until the
earlier of the maturity or disposition of such instrument. This possible
mismatch of cash and income is potentially problematic given the requirement
that income be currently distributed to avoid income tax at the REIT level and
the requirement that CRIIMI MAE distribute at least 95% of its ordinary
taxable income (minus excess noncash income within the meaning of section
857(e) of the Code) each year to retain its qualification as a REIT. CRIIMI
MAE believes, however, that it has access to sufficient sources of cash to
allow it to distribute currently the income attributable to OID instruments
that it holds.
CRIIMI MAE is not aware of any present circumstances that would cause it
to fail to qualify as a REIT, nor does it anticipate any such circumstances in
the reasonably foreseeable future. If the IRS successfully challenged the tax
status of CRIIMI MAE as a REIT, CRIIMI MAE's earnings would become subject to
federal income tax (including any applicable minimum tax) at regular corporate
rates. Distributions to stockholders in any year in which CRIIMI MAE fails to
qualify would not be deductible by CRIIMI MAE, nor would they be required to
be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable to them as ordinary
income, and, subject to certain limitations of the Code, corporate
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distributees might be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, CRIIMI MAE also would
be disqualified from taxation as a REIT for the four taxable years following
the year during which qualification was lost. It is not possible to state
whether in all circumstances CRIIMI MAE would be entitled to such statutory
relief.
CRIIMI MAE derives a portion of its income from CRIIMI MAE Management,
Inc.'s interest as a forty-seven percent (47%) general partner in the Services
Partnership, the Company's affiliate through which it conducts its mortgage
loan servicing and advisory services, and CRIIMI MAE's ownership of non-voting
preferred stock of the Services Corporation, which is the fifty-three percent
(53%) limited partner in the Services Partnership (both figures as of June
30,1997). The income derived via CRIIMI MAE's indirect forty-seven percent
(47%) general partnership interest in the Services Partnership will have the
same character as it does in the hands of the Services Partnership and will
not qualify under either the 95% or 75% gross income tests.
The income derived by the Services Corporation through its limited
partnership interest in the Services Partnership will be subject to corporate
income taxes. To the extent the Services Corporation pays dividends to CRIIMI
MAE, such dividends will be qualified income for purposes of the 95% gross
income test, but not for purposes of the 75% gross income test. Payments of
interest on certain installment notes payable by the Services Corporation to
CRIIMI MAE Management, Inc. will reduce the taxable income of the Services
Corporation and will be qualified REIT income for CRIIMI MAE for the purposes
of the 95% gross income test, but not for purposes of the 75% gross income
test. CRIIMI MAE believes that the amount of non-qualifying gross income
estimated to be allocated to CRIIMI MAE in future years as a result of its
general partnership interest in the Services Partnership will be less than
five percent (5%) of CRIIMI MAE's aggregate gross income in each year.
Any gain realized by CRIIMI MAE on the sale of any property (including
mortgage loans and mortgage-backed securities) held as inventory or other
property held primarily for sale to customers in the ordinary course of
business will be treated as income from prohibited transactions that is
subject to a one hundred percent (100%) penalty tax. Any such prohibited
transactions also could have an adverse effect upon CRIIMI MAE's ability to
satisfy the income tests for qualification as a REIT. Under existing law,
whether property is held as inventory or primarily for sale to customers in
the ordinary course of a trade or business is a question of fact that depends
upon the facts and circumstances with respect to the particular transaction.
CRIIMI MAE does not believe that its assets qualify as inventory or other
property held primarily for sale to customers in the ordinary course of
business and, accordingly, does not believe that income from the sale of such
assets will be treated as income from prohibited transactions.
If CRIIMI MAE has any "excess inclusion" income (attributable to its
interest, if any, in a residual interest in a real estate mortgage investment
conduit ("REMIC") or if all or a portion of CRIIMI MAE or its subsidiaries are
treated as a taxable mortgage pool ("TMP") under section 7701(i) of the Code,
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and a "disqualified organization" (generally, tax-exempt entities not subject
to tax on unrelated business income, including governmental organizations)
holds Capital Shares, CRIIMI MAE will be taxed at the highest corporate income
tax rate on the amount of excess inclusion income for the taxable year
allocable to the Capital Shares held by such disqualified organization. If
Capital Shares are held by a pass-through entity (such as a REIT or mutual
fund) and the shares of such pass-through entity are held by a disqualified
organization, then such pass-through entity, rather than CRIIMI MAE, will be
subject to tax. Pass-through entities contemplating the purchase of the
Capital Shares offered hereby are urged to consult with their own tax advisor
concerning the tax consequences of holding Capital Shares.
With respect to any asset (a "Built-In Gain Asset") acquired by CRIIMI
MAE from a corporation which is or has been a C corporation (i.e., generally a
corporation subject to full corporate-level tax) in a transaction in which the
basis of the Built-In Gain Asset in the hands of CRIIMI MAE is determined by
reference to the basis of the asset in the hands of the C corporation, if
CRIIMI MAE recognized gain on the disposition of such asset during the ten
year period (the "Recognition Period") beginning on the date on which such
asset was acquired by CRIIMI MAE, then, to the extent of the Built-In Gain
(i.e., the excess of (a) the fair market value of such asset over (b) CRIIMI
MAE's adjusted basis in such asset, determined as of the beginning of the
Recognition Period), such gain will be subject to tax at the highest regular
corporate rate pursuant to Treasury Regulations that have not yet been
promulgated. The results described above with respect to the recognition of
Built-In Gain assume that CRIIMI MAE will make an election pursuant to IRS
Notice 88-19. CRIIMI MAE does not believe that it presently owns any
significant amount of Built-In Gain Assets.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
As long as CRIIMI MAE qualifies as a REIT, distributions made to CRIIMI
MAE's taxable U.S. stockholders out of current or accumulated earnings and
profits, as determined for United States federal income tax purposes, and not
designated as capital gain dividends, will be taken into account by such
stockholders as ordinary income and will not be eligible for the dividends
received deduction for stockholders that are corporations. Distributions that
are designated by CRIIMI MAE as capital gain dividends will be taxed as long-
term capital gains (to the extent that they do not exceed CRIIMI MAE's actual
net capital gain for the taxable year) without regard to the period for which
the stockholder has held its Capital Shares. However, corporate stockholders
are required to treat capital gain dividends as a preference item for
alternative minimum tax ("AMT") purposes and could be subject to AMT at a rate
of twenty percent (20%) on such gains. To the extent that CRIIMI MAE makes
distributions in excess of current and accumulated earnings and profits as
determined for federal income tax purposes, these distributions are treated
first as a tax-free return of capital to the stockholder, reducing the tax
basis of a stockholder's Capital Shares by the amount of such distribution
(but not below zero), with distributions in excess of the stockholder's tax
basis taxable as gain from the sale or exchange of Capital Shares. In
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addition, any dividend declared by CRIIMI MAE in October, November or December
of any year and payable to a stockholder of record on a specific date in any
such month shall be treated as both paid by CRIIMI MAE and received by the
stockholder on December 31 of such year, provided that the dividend is
actually paid by CRIIMI MAE during January of the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of CRIIMI MAE.
Because CRIIMI MAE has more than one class of stock outstanding, it must
allocate available earnings and profits between distributions to the different
classes of stock on the basis of the dividend preferences established by local
law and under its governing instruments.
CRIIMI MAE has issued, and intends in the future to issue, debt
instruments which might cause CRIIMI MAE or its subsidiaries to be treated as
a TMP under section 7701(i) of the Code. If CRIIMI MAE or any of its
subsidiaries is treated as a TMP, some portion of the ordinary or capital gain
dividends received by a stockholder may be considered excess inclusion income.
If a portion of the ordinary or capital gain dividends received by a
stockholder from CRIIMI MAE is designated as excess inclusion income, the
taxable income of that stockholder shall in no event be less than its
allocable excess inclusion income, regardless of its other items of income or
deduction. In addition, if a mutual fund is a stockholder of CRIIMI MAE, the
mutual fund's investors who are Non-U.S. Holders or tax-exempt entities will
encounter, with respect to their indirect share of any excess inclusion
income, the same consequences as described below under "--Taxation of Non-U.S.
Holders" and "--Taxation of Tax-Exempt Stockholders." CRIIMI MAE does not
anticipate that a significant portion of its ordinary and capital gain
dividends will consist of excess inclusion income.
In general, any loss upon a sale or exchange of Capital Shares by a
stockholder who has held such Capital Shares for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions from CRIIMI MAE required to be treated by
such stockholder as long-term capital gains.
Section 305(c) of the Code and the Treasury regulations thereunder treat
as a dividend certain constructive distributions of stock with respect to
preferred stock. Certain adjustments to the conversion price of the Series C
Preferred Shares may be treated as dividends to holders of such shares.
Conversely, the failure to make certain adjustments to the conversion price to
reflect certain events may result in a taxable dividend to other stockholders.
TAXATION OF NON-U.S. HOLDERS
Taxation of Distributions. In general, distributions to a Non-U.S. Holder
of Capital Shares that are not attributable to gain from the sale or exchange
of United States real property interests and are not designated by CRIIMI MAE
as capital gain dividends will be treated as dividends of ordinary income (to
the extent of earnings and profits for U.S. federal income tax purposes). Such
distributions ordinarily will be subject to withholding of U.S. federal income
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tax at a thirty percent (30%) rate, unless such rate is reduced by an
applicable income tax treaty. Dividends that are effectively connected with
such holder's conduct of a trade or business in the United States or, to the
extent a tax treaty applies, attributable to a permanent establishment in the
United States ("U.S. trade or business income") generally are subject to U.S.
federal income tax at regular rates (and, in the case of a Non-U.S. Holder
that is a corporation, under certain circumstances may be subject to an
additional "branch profits tax" at a thirty percent (30%) rate or such lower
rate as may be applicable under an income tax treaty), but are not generally
subject to the 30% withholding tax if the Non-U.S. Holder provides CRIIMI MAE
in a timely manner with either (i) an IRS Form 1001 demonstrating that the
Non-U.S. Holder is entitled to a reduced rate of tax or exempt from
withholding tax under an applicable treaty, or (ii) if such distributions are
"effectively connected" income, an IRS Form 4224. Excess inclusion income
accrued by a Non-U.S. holder is subject to 30% withholding unless such income
is effectively connected with a U.S. trade or business. Such withholding is
not subject to reduction under income tax treaties.
A Non-U.S. Holder that is required to submit a certification on Form 1001
or Form 4224 to avoid or reduce the imposition of United States federal
withholding tax with respect to a dividend on Capital Shares is required to
submit such certification to CRIIMI MAE as soon as practicable after the
Non-U.S. Holder acquires such shares or a beneficial interest therein. If
CRIIMI MAE does not physically receive such certification by the date that is
ten (10) days prior to a dividend payment date, CRIIMI MAE may treat such
certification as ineffective with respect to any payment to such Non-U.S.
Holder and may withhold tax from such payment on such date. The Non-U.S.
Holder will be responsible for ensuring that all IRS Forms are properly
updated. If an IRS Form provided by a Non-U.S. Holder is not properly updated,
CRIIMI MAE will commence withholding on the dividend payment date on or
following the date that such form becomes no longer current.
Distributions by CRIIMI MAE which are not dividends out of earnings and
profits (as determined for U.S. federal income tax purposes) should not be
subject to U.S. withholding tax. Such distributions are treated first as a
tax-free return of capital to the Non-U.S. Holder, reducing the tax basis of
the Non-U.S. Holder's Capital Shares by the amount of such distribution (but
not below zero), with distributions in excess of the Non-U.S. Holder's tax
basis taxable (to the same extent described below) as a sale or exchange of
Capital Shares. If it cannot be determined at the time a distribution is made
whether or not such distribution will be in excess of current and accumulated
earnings and profits, the entire amount of the distribution will be subject to
withholding at the rate applicable to dividends. However, the Non-U.S. Holder
may seek a refund of such amounts from the IRS if it is subsequently
determined that such distribution was, in fact, in excess of current and
accumulated earnings and profits of CRIIMI MAE. CRIIMI MAE does not expect to
pay dividends in excess of current and accumulated earnings and profits. If
(i) any portion of the ordinary or capital gains dividends received by a
foreign stockholder from CRIIMI MAE is designated as excess inclusion income
(as determined for U.S. federal income tax purposes) and (ii) if the dividend
is U.S. trade or business income, the U.S. trade or business income of such
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holder shall in no event be less than its taxable excess inclusion income,
regardless of its other items of income or deduction. CRIIMI MAE does not
anticipate that a significant portion of its ordinary and capital gains
dividends will consist of excess inclusion income.
Under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"),
for as long as CRIIMI MAE qualifies as a REIT, a distribution made by CRIIMI
MAE to a Non-U.S. Holder that is attributable to gains from the sale or
exchange of U.S. real property interests generally will be taxable as U.S.
trade or business income. Therefore, Non-U.S. Holders generally will be taxed
at the capital gain rates applicable to U.S. stockholders (subject to
applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Distributions subject to FIRPTA
also may be subject to a 30% branch profits tax in the hands of a corporate
Non-U.S. Holder (unless reduced or eliminated by treaty). In addition, CRIIMI
MAE will be required to withhold U.S. tax equal to thirty-five percent (35%)
of the amount of dividends that could have been designated as capital gain
dividends, but such requirement apparently is limited to the amount of such
gain that is attributable to the sale or exchange of U.S. real property
interests. The amount so withheld is creditable against the U.S. federal
income tax liability of such Non-U.S. Holder and a refund may be available if
the amount withheld exceeds the U.S. federal income tax liability of the
Non-U.S. Holder. CRIIMI MAE does not foresee that any gains on its mortgage
investments would be subject to FIRPTA (provided CRIIMI MAE does not foreclose
upon the real property underlying such mortgage investments) because such
mortgage investments qualify as debt instruments rather than real estate
assets under FIRPTA. The characterization of CRIIMI MAE's mortgage investments
as debt is supported by numerous factors, including the fact that CRIIMI MAE
will not be entitled to a direct or indirect right to share in the
appreciation in the value of, or in the gross or net proceeds or profits
generated by, the underlying real property.
Taxation Upon the Sale or Exchange of Capital Shares. Under FIRPTA, if a
REIT qualifies as a "domestically controlled REIT," a sale of shares in the
REIT by a Non-U.S. Holder generally will not be subject to U.S. taxation under
FIRPTA. A REIT is a domestically controlled REIT if, at all times during a
specified testing period, less than fifty percent (50%) in value of its shares
is held directly or indirectly by Non-U.S. Holders. CRIIMI MAE is currently,
and anticipates continuing to be, a domestically controlled REIT. Therefore,
it anticipates that a Non-U.S. Holder's sale of Capital Shares will not be
subject to taxation under FIRPTA. Because the Capital Shares will be publicly
traded, however, no assurance can be given that CRIIMI MAE will continue to be
a domestically controlled REIT.
If CRIIMI MAE does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of Capital Shares nevertheless will not be subject to
tax under FIRPTA provided that either (i) CRIIMI MAE is not a "United States
real property holding corporation" ("USRPHC"), which is defined in the Code
generally as any corporation if the net fair market value of its U.S. real
property interests accounts for fifty percent (50%) or more of the net fair
market value of its assets at any time during the five-year period prior to
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such sale, or (ii) its shares are "regularly traded" (as defined by applicable
Treasury regulations) on an established securities market (e.g., the NYSE),
and the selling Non-U.S. Holder held five percent (5%) or less of CRIIMI MAE's
outstanding shares at all times during a specified testing period. CRIIMI MAE
does not believe that it qualifies as a USRPHC (and believes that it will
continue not to qualify as a USRPHC provided it does not foreclose upon a
significant percentage of the real property underlying its mortgage
investments) because the vast majority of its assets are mortgage assets (and
therefore debt instruments) rather than real property. As such, even if CRIIMI
MAE failed to qualify as a domestically controlled REIT, non-U.S. sellers of
Capital Shares should not be subject to FIRPTA. It is not anticipated at this
time that CRIIMI MAE will list the Series C Preferred Shares on an established
securities market.
If gain on the sale of the Capital Shares by a Non-U.S. Holder is subject
to taxation under FIRPTA, the income would be taxable as U.S. trade or
business income (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Even if
FIRPTA does not apply to the sale of the Capital Shares, a Non-U.S. Holder
that owns the Capital Shares as a capital asset nonetheless will be subject to
U.S. federal income tax on any gain realized on the sale of Capital Shares if
(i) such gain is U.S. trade or business income, (ii) in the case of gain
realized by an individual Non-U.S. Holder, such Non-U.S. Holder is present in
the United States for 183 days or more during the year of such sale and
certain other conditions are met, or (iii) the Non-U.S. Holder is taxed under
rules applicable to certain U.S. expatriates.
In general, an individual who is a Non-U.S. Holder for U.S. estate tax
purposes will incur liability for U.S. federal estate tax if the fair market
value of the property included in such individual's taxable estate for U.S.
federal estate tax purposes exceeds the statutory threshold amount. For these
purposes, Capital Shares owned or treated as owned by an individual who is a
Non-U.S. Holder (for U.S. estate tax purposes) at the time of death will be
included in the individual's taxable estate for U.S. federal estate tax
purposes, unless an applicable estate tax treaty provides otherwise.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The IRS has issued a revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employee pension trust do not constitute
unrelated business taxable income ("UBTI"). Revenue rulings, however, are
interpretive in nature and are subject to revocation or modification by the
IRS. Based upon the ruling and the analysis therein, distributions by CRIIMI
MAE to a stockholder that is a tax-exempt entity also should not constitute
UBTI, provided that the tax-exempt entity has not financed the acquisition of
its Capital Shares with "acquisition indebtedness" within the meaning of the
Code, and that the Capital Shares are not otherwise used in an unrelated trade
or business of the tax-exempt entity.
Code section 401(a) pension trusts generally will not be treated as a
single individual for purposes of determining whether CRIIMI MAE satisfies the
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prohibition against REITs being closely held (closely held being defined as
more than fifty percent (50%) of the value of its outstanding stock being
owned, directly or indirectly, by or for five or fewer individuals). Instead,
a "look-through" rule will be applied, whereby the beneficiaries of the
pension trust will be treated as holding stock in CRIIMI MAE in proportion to
their interests in the pension trust.
If CRIIMI MAE were to satisfy the closely-held prohibition only by
application of the "look-through" rule, pension trusts holding more than ten
percent (10%) by value of the interests in CRIIMI MAE may be required to treat
a percentage of the dividends received from CRIIMI MAE as UBTI. Generally, a
percentage of dividends received by such 10% pension trust stockholders will
be treated as UBTI if: (i) at least one pension trust holds more than twenty-
five percent (25%) by value of the interests in CRIIMI MAE, or (ii) one or
more pension trusts (each of which hold more than 10% by value of interests in
CRIIMI MAE) hold in the aggregate more than 50% by value of the interests in
CRIIMI MAE. The percentage treated as UBTI would be the gross income of
CRIIMI MAE that is derived from an unrelated trade or business (determined as
if CRIIMI MAE were a pension trust) divided by the gross income of CRIIMI MAE
for the year in which the dividends were paid. If the percentage so determined
was less than five percent (5%), none of the dividends would be treated as
UBTI.
CRIIMI MAE has issued and intends to issue in the future debt instruments
which might cause CRIIMI MAE to be considered a TMP under section 7701(i) of
the Code. If CRIIMI MAE or any of its subsidiaries is treated as a TMP, a
portion of the ordinary or capital gain dividends received by a tax-exempt
stockholder may be considered excess inclusion income. If a portion of the
ordinary or capital gain dividends received by a tax-exempt stockholder is
designated as excess inclusion income, such amount will be considered UBTI.
Additionally, the UBTI of a tax-exempt stockholder shall in no event be less
than its allocable share of excess inclusion income, regardless of its other
items of income or deduction. CRIIMI MAE does not anticipate that a
significant portion of its ordinary and capital gain dividends will constitute
excess inclusion income.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Payments in respect of dividends or proceeds from the sale or other
disposition of Capital Shares may be subject to information reporting to the
IRS and to a thirty-one percent (31%) U.S. backup withholding tax. Backup
withholding generally will not apply, however, to a holder who furnishes a
correct taxpayer identification number and makes any other required
certification or who is otherwise exempt from backup withholding. In addition,
backup withholding generally will not apply to dividends paid on Capital
Shares to a Non-U.S. Holder outside of the United States. Backup withholding
is not an additional tax. Rather, the amount of any backup withholding with
respect to a payment to a stockholder will be allowed as a credit against such
stockholder's federal income tax liability and may entitle such stockholder to
a refund, provided that the required information is furnished to the IRS.
Accordingly, stockholders should consult their own tax advisors with respect
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to any such information reporting and backup withholding requirements,
including their potential for qualification for exemption therefrom.
PLAN OF DISTRIBUTION
All of the Series C Preferred Shares offered hereby are being purchased
by a European institutional investor (the "Institutional Investor") pursuant
to CRIIMI MAE's exercise of a put option that it acquired from the
Institutional Investor on March 19, 1997. In connection with this offering,
CRIIMI MAE shall pay $450,000.00 (equal to $3.00 for each Series C Preferred
Share sold) to exercise such put option. Other than the foregoing payments,
the Institutional Investor has not received from CRIIMI MAE any fees,
discounts, commissions or other compensation in connection with the purchase
of the Series C Preferred Shares. The Institutional Investor is not
purchasing the Series C Preferred Shares from CRIIMI MAE with a view to the
immediate distribution thereof.
CRIIMI MAE will pay all commissions, transfer taxes and other expenses
associated with the sale of the Series C Preferred Shares offered hereby,
including the expenses of the preparation of this Prospectus Supplement.
CRIIMI MAE has not made any underwriting arrangements with respect to the sale
of the Series C Preferred Shares offered hereby.
LEGAL MATTERS
Certain matters relating to the validity of the Series C Preferred Shares
offered hereby have been passed upon for CRIIMI MAE by Swidler & Berlin,
Chartered, Washington, D.C.
EXPERTS
The financial statements included in CRIIMI MAE's Annual Report on Form
10-K for the year ended December 31, 1996, incorporated herein by reference,
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and have been incorporated by
reference herein in reliance upon the authority of said firm as experts in
accounting and auditing.
S-26<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH
ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN
THE SECURITIES OFFERED HEREBY, NOR DO THEY CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE
INFORMATION CONTAINED HEREIN OR THEREIN OR IN THE AFFAIRS OF CRIIMI MAE SINCE
THE DATE HEREOF.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
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CRIIMI MAE................................................................S-2
Recent Developments.......................................................S-2
Risk Factors..............................................................S-2
Use of Proceeds...........................................................S-5
Price Range of Common Shares and Dividends................................S-6
Ratios of Earnings to Combined Fixed Charges and
Preferred Stock Dividends.................................................S-6
Description of Series C Preferred Shares..................................S-7
Certain United States Federal Income Tax Considerations...................S-12
Plan of Distribution......................................................S-22
Legal Matters.............................................................S-23
Experts...................................................................S-23
PROSPECTUS
PAGE
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Available Information.......................................................2
Incorporation of Certain Documents by Reference.............................2
CRIIMI MAE..................................................................4
Use of Proceeds.............................................................4
Ratios of Earnings to Fixed Charges.........................................4
Description of Debt Securities..............................................4
Description of Capital Stock...............................................14
Certain United States Tax Considerations...................................19
Plan of Distribution.......................................................20
Legal Matters..............................................................21
Experts....................................................................21
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CRIIMI MAE INC.
150,000 SHARES
SERIES C CUMULATIVE CONVERTIBLE
PREFERRED STOCK
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PROSPECTUS SUPPLEMENT
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September 22, 1997
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<PAGE>
PROSPECTUS
CRIIMI MAE INC.
$300,000,000
DEBT SECURITIES, PREFERRED SHARES, COMMON SHARES AND WARRANTS
CRIIMI MAE Inc. ("CRIIMI MAE") may from time to time offer in one or more
series its unsecured subordinated debt securities (the "Debt Securities"),
shares of its preferred stock, par value $.01 per share (the "Preferred
Shares"), shares of its common stock, par value $.01 per share (the "Common
Shares"), and warrants to purchase Preferred Shares or Common Shares (the
"Warrants"), with an aggregate public offering price of up to $300,000,000 (or
its foreign currency equivalent based on the exchange rate at the time of
sale)in amounts, at prices and on terms to be determined at the time of
offering. The Debt Securities, Preferred Shares, Common Shares and Warrants
(collectively, the "Securities") may be offered, separately or together, in
separate series in amounts, at prices and on terms to be set forth in one or
more supplements to this Prospectus (each, a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of CRIIMI MAE
subordinated to existing and future senior indebtedness, as defined. See
"Description of Debt Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the
specific title, ranking, aggregate principal amount, currency, form (which may
be registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of CRIIMI MAE or repayment at the
option of the holder, terms for sinking fund payments, terms for conversion
into Preferred Shares or Common Shares, covenants and any initial public
offering price; (ii) in the case of Preferred Shares, the specific title and
stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Common Shares, any public offering price; and (iv) in the case of Warrants,
the number and terms thereof, the designation and number or amount of
Preferred Shares or Common Shares issuable upon their exercise, the exercise
price, the terms of the offering and sale thereof and, where applicable, the
duration and detachability thereof. In addition, such specific terms may
include limitations on direct or beneficial ownership and restrictions on
transfer of the Securities, in each case as may be appropriate to preserve the
status of CRIIMI MAE as a real estate investment trust ("REIT") for federal
income tax purposes. See "Certain United States Federal Income Tax
Considerations."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by CRIIMI MAE, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their
names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in the applicable Prospectus Supplement. See
"Plan of Distribution." No Securities may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering of such Securities.
CRIIMI MAE's Common Shares, and shares of its Series B Cumulative
Convertible Preferred Stock, par value $.01 per share (the "Series B Preferred
Shares"), are traded on the New York Stock Exchange (the "NYSE") under the
symbol "CMM" and "CMM-PrB," respectively.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF THE SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
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THE DATE OF THIS PROSPECTUS IS JUNE 6, 1997.
<PAGE>
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AVAILABLE INFORMATION
CRIIMI MAE and its subsidiaries, CRI Liquidating REIT, Inc. ("CRI
Liquidating") and CRIIMI MAE Financial Corporation, are subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC" or "Commission"). Reports, proxy statements and other information
filed by CRIIMI MAE, CRI Liquidating and CRIIMI MAE Financial Corporation can
be inspected and copied at the SEC's Public Reference Room, 450 Fifth Street,
N.W., Washington, D.C. 20549 and the SEC's Regional Offices at 7 World Trade
Center, Suite 1300, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and copies of such material can be
obtained from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, reports, proxy
material and other information concerning CRIIMI MAE, CRI Liquidating and
CRIIMI MAE Financial Corporation may be inspected at the NYSE, 20 Broad
Street, New York, New York 10005 or reviewed through the Commission's
Electronic Data Gathering Analysis and Retrieval System, which is publicly
available through the Commission's Web site (http://www.sec.gov).
This Prospectus constitutes part of a Registration Statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement")
filed by CRIIMI MAE with the SEC under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of the
information included in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. Reference is
made to the Registration Statement for further information with respect to
CRIIMI MAE and the Securities. Statements contained in this Prospectus and any
accompanying Prospectus Supplement concerning the provisions or contents of
any contract, agreement or any other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit for a more complete description of the matters involved, and
each such statement shall be deemed qualified in its entirety by such
reference to the copy of the applicable document filed with the Commission.
The Registration Statement including the exhibits and schedules thereto, may
be inspected without charge at the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. and copies of it or any part thereof may be
obtained from such office, upon payment of the fees prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by CRIIMI MAE with the SEC (File
No. 1-10360) are incorporated herein by reference (collectively, the
"Incorporated Information"):
1. Annual Report on Form 10-K for the year ended December 31, 1996.
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1997.
3. Definitive Proxy Statements dated March 26, 1997, April 28, 1995 and
April 6, 1993.
4. Form 8-K, as filed with the SEC on May 23, 1997.
5. Form 8-K, as filed with the SEC on March 25, 1997.
6. Form 8-K, as filed with the SEC on June 30, 1995.
7. Form 8-A, as filed with the SEC on October 16, 1989.
8. Form 8-B, as filed with the SEC on October 27, 1993.
The Prospectus should be read in conjunction with the Incorporated
Information and any applicable Prospectus Supplement, which are incorporated
by reference into the Prospectus. All documents filed by CRIIMI MAE pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of the offering of the Securities
offered hereby shall be deemed to be incorporated by reference in this
Prospectus from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
CRIIMI MAE will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, on the
written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents, unless such
exhibits are specifically incorporated by reference. Requests for such copies
should be directed to CRIIMI MAE's principal executive offices: CRIIMI MAE
Inc., Investor Services, 11200 Rockville Pike, Rockville, Maryland 20852, or
telephone (301) 816-2300 or toll-free (800) 266-0535.
2
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CRIIMI MAE
CRIIMI MAE is a full service commercial mortgage company structured as a
self-administered real estate investment trust ("REIT"). CRIIMI MAE's
portfolio of assets consists primarily of non-investment grade subordinated
securities backed by first mortgage loans on multifamily and other commercial
real estate ("Subordinated CMBS") and interests in government insured or
guaranteed mortgages secured by multifamily housing complexes located
throughout the United States. CRIIMI MAE believes that its concentration on
acquiring Subordinated CMBS, together with its expertise as an underwriter and
servicer of commercial mortgage loans, enables CRIIMI MAE to take advantage of
the rapid growth in the securitization of debt backed by income-producing
commercial real estate. CRIIMI MAE is one of the largest publicly traded REITs
focused primarily on the acquisition of Subordinated CMBS. In addition, CRIIMI
MAE provides certain servicing functions with respect to commercial mortgage
assets, including acting as the special servicer for the commercial mortgage
loans underlying its Subordinated CMBS portfolio.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, CRIIMI MAE intends to use the majority of the net
proceeds from the sale of Securities (i) to acquire additional mortgage
assets, including Subordinated CMBSs, (ii) to sponsor and/or participate in
collateralized mortgage obligation programs, (iii) to make other acquisitions
relating to CRIIMI MAE's mortgage business and/or (iv) for other general
corporate purposes, including working capital. Pending their use for the
foregoing purposes, the net proceeds may be invested in short term, interest-
bearing accounts and/or used to pay down debt on a temporary basis.
RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth CRIIMI MAE's consolidated ratios of (i)
earnings to fixed charges and (ii) earnings to combined fixed charges and
preferred stock dividends for the periods shown:
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------ -------------
1992 1993 1994 1995 1996 1996 1997
---- ---- ---- ---- ---- ------ ------
Ratio of earnings to fixed charges... 1.69 1.48 1.66 1.35 1.50 1.74 1.94
Ratio of earnings to combined fixed
charges and preferred stock
dividends*.......................... 1.69 1.48 1.66 1.35 1.47 1.74 1.86
- --------
* Prior to the offering of Series A Cumulative Convertible Preferred Stock on
July 1, 1996, CRIIMI MAE did not have any issued or outstanding Preferred
Shares.
For purposes of computing these ratios, earnings consist of CRIIMI MAE's
consolidated net income, plus fixed charges, extraordinary items, loss from
investment in limited partnerships and dividends on Preferred Shares. Fixed
charges and Preferred Share dividends consist of gross interest cost,
including amortization of debt cost, discount or premium and adjustment to
hedges for valuation and sales, and dividends on Preferred Shares.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities are to be issued under an indenture (the "Indenture")
between CRIIMI MAE and a trustee (the "Trustee"). The form of the Indenture is
filed as an exhibit to the Registration Statement of which
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this Prospectus is a part. The Indenture is subject to and governed by the
Trust Indenture Act of 1939, as amended (the "TIA"). The statements made under
this heading relating to the Debt Securities and the Indenture, as modified or
superseded by any applicable Prospectus Supplement, are summaries of the
provisions thereof and do not purport to be complete and are qualified in
their entirety by reference to the Indenture and such Debt Securities. If Debt
Securities are to be issued, a description of their terms (as well as the form
of Debt Securities) will be filed by CRIIMI MAE as an exhibit to a current
report on Form 8-K and incorporated herein by reference.
When issued, the Debt Securities will be direct, unsecured obligations of
CRIIMI MAE and, as set forth below under "--Subordination," will be
subordinate in right of payment to Senior Debt (as defined below) of CRIIMI
MAE. In addition to the terms of the Indenture and any specific, express terms
of the Debt Securities described below, the issuance of the Debt Securities
will be limited by, and subject to certain terms of, CRIIMI MAE's existing
financing facilities.
TERMS
The Indenture may provide that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of CRIIMI MAE (the "Board") or as
established in one or more indentures supplemental to such Indenture. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the
holders of the Debt Securities of such series, for issuances of additional
Debt Securities of such series.
The Indenture may also provide that there may be more than one Trustee
thereunder, each with respect to one or more series of Debt Securities. Any
Trustee under the Indenture may resign or be removed with respect to one or
more series of Debt Securities, and a successor Trustee may be appointed to
act with respect to such series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each
such Trustee shall be a Trustee of a trust under the Indenture separate and
apart from the trust administered by any other Trustee, and, except as
otherwise indicated therein, any action described therein to be taken by the
Trustee may be taken by each such Trustee with respect to, and only with
respect to, the one or more series of Debt Securities for which it is Trustee
under the Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion
of the principal amount thereof payable upon declaration of acceleration of
the maturity thereof, or (if applicable) the portion of the principal
amount of such Debt Securities that is convertible into Common Shares
and/or Preferred Shares, or the method by which any such portion shall be
determined;
(4) if convertible, in connection with the preservation of CRIIMI MAE's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares and/or Preferred Shares into which
such Debt Securities are convertible;
(5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(7) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which such dates shall be
determined, the persons to
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whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(8) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon CRIIMI MAE in respect of
such Debt Securities and the Indenture may be served;
(9) the period or periods within which, the price or prices at which and
the other terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of CRIIMI MAE, if CRIIMI MAE
is to have such an option;
(10) the obligation, if any, of CRIIMI MAE to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a holder thereof, and the period or periods within which,
the price or prices at which and the other terms and conditions upon which
such Debt Securities will be redeemed, repaid or purchased, as a whole or
in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) whether such Debt Securities will be issued in the form of one or
more global securities and whether such global securities are to be
issuable in a temporary global form or permanent global form;
(14) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the events of default or covenants set
forth in the Indenture;
(15) whether such Debt Securities will be issued in certificated or book-
entry form;
(16) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(17) the applicability, if any, of the defeasance and covenant defeasance
provisions of the Indenture;
(18) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares and/or Preferred Shares and the terms and
conditions upon which such conversion will be effected, including, without
limitation, the initial conversion price or rate and the conversion period;
(19) whether and under what circumstances CRIIMI MAE will pay additional
amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether CRIIMI MAE will have the option to
redeem such Debt Securities in lieu of making such payment; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") or that the principal amount thereof
payable at their stated maturity may be more or less than the principal amount
thereof at original issuance ("Indexed Securities"). Special U.S. federal
income tax, accounting and other considerations applicable to Original Issue
Discount Securities or Indexed Securities will be described in the applicable
Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt Securities
will not contain any provisions that would limit the ability of CRIIMI MAE to
incur indebtedness or that would afford holders of Debt Securities protection
in the event of a highly leveraged or similar transaction involving CRIIMI MAE
or in the event of a change of control. Restrictions on ownership and
transfers of CRIIMI MAE's Common Shares
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and Preferred Shares are designed to preserve its status as a REIT and,
therefore, may act to prevent or hinder a change of control. See "Description
of Capital Stock." Reference is made to the applicable Prospectus Supplement
for information with respect to any deletions from, modifications of, or
additions to, the events of default or covenants of CRIIMI MAE that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee;
provided that, at the option of CRIIMI MAE, payment of interest may be made by
check mailed to the address of the person entitled thereto as it appears in
the register to be maintained by the Trustee or by wire transfer of funds to
such person at an account maintained within the United States.
Any interest not punctually paid or duly provided for on any interest
payment date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder thereof on the applicable record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice whereof shall be given to each holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described
in the Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the corporate trust office
of the applicable Trustee. Every Debt Security tendered for conversion,
registration of transfer or exchange shall be duly endorsed or accompanied by
a written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but CRIIMI MAE
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the applicable
Trustee) initially designated by CRIIMI MAE with respect to any series of Debt
Securities, CRIIMI MAE may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that CRIIMI MAE will be required to maintain a
transfer agent in each place of payment for such series of Debt Securities.
CRIIMI MAE may at any time designate additional transfer agents with respect
to any series of Debt Securities.
To protect CRIIMI MAE's status as a REIT, CRIIMI MAE may refuse to effect a
transfer of Debt Securities if, as a result of such transfer, any person would
beneficially own, either directly or indirectly, more than 9.8% of CRIIMI
MAE's outstanding capital stock. Neither CRIIMI MAE nor any Trustee shall be
required to (i) issue, register the transfer of or exchange Debt Securities of
any series during a period beginning at the opening of business 15 days before
any selection of Debt Securities of that series to be redeemed and ending at
the close of business on the day of mailing of the relevant notice of
redemption; (ii) register the transfer of or exchange any Debt Security, or
portion thereof, called for redemption, except the unredeemed portion of any
Debt Security being redeemed in part; or (iii) for Debt Securities repayable
at the option of the holder, issue, register the transfer of or exchange any
Debt Security that has been surrendered for repayment at the option of the
holder, except the portion, if any, of such Debt Security not to be so repaid.
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MERGER, CONSOLIDATION OR SALE
The Indenture will provide that CRIIMI MAE may consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other corporation or trust or other entity provided that (a) either
CRIIMI MAE shall be the continuing corporation, or the successor corporation
(if other than CRIIMI MAE) formed by or resulting from any such consolidation
or merger or which shall have received the transfer of such assets shall
expressly assume payment of the principal of (and premium, if any) and
interest on all of the Debt Securities and the due and punctual performance
and observance of all of the covenants and conditions contained in the
Indenture; (b) immediately after giving effect to such transaction and
treating any indebtedness that becomes an obligation of CRIIMI MAE or any
subsidiary as a result thereof as having been incurred by CRIIMI MAE or such
subsidiary at the time of such transaction, no event of default under the
Indenture, and no event which, after notice or the lapse of time, or both,
would become such an event of default, shall have occurred and be continuing;
and (c) an officers' certificate and legal opinion covering such conditions
shall be delivered to each Trustee.
CERTAIN COVENANTS
Existence. Except as permitted under "--Merger, Consolidation or Sale,"
CRIIMI MAE will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights (charter and
statutory) and franchises; provided, however, that CRIIMI MAE shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of its business.
Maintenance of Properties. CRIIMI MAE will cause all of its material
properties used or useful in the conduct of its business or the business of
any subsidiary to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of CRIIMI MAE may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that CRIIMI MAE and its
subsidiaries shall not be prevented from selling or otherwise disposing for
value its mortgage investments and other assets in the ordinary course of
business.
Payment of Taxes and Other Claims. CRIIMI MAE will pay or discharge or cause
to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
subsidiary or upon the income, profits or property of CRIIMI MAE or any
subsidiary, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of CRIIMI MAE
or any subsidiary; provided, however, that CRIIMI MAE shall not be required to
pay or discharge or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount, applicability or validity is being contested in
good faith.
Additional Covenants. Any additional covenants of CRIIMI MAE with respect to
any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture will provide that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series when due and payable, at maturity,
upon redemption or otherwise which continues for five business days; (c)
default in making any sinking fund payment as required for any Debt Security
of such series which continues for five business days; (d) default in the
performance or breach of any other covenant or warranty of CRIIMI MAE
contained in the Indenture (other than a covenant added to the Indenture
solely for the benefit of a series of Debt Securities issued thereunder other
than such series), continued for 60 days after written notice as provided in
the Indenture; (e) a default not being contested in good faith by CRIIMI MAE
under any bond, debenture, note or other evidence of indebtedness for money
borrowed by CRIIMI MAE (including obligations under leases required to be
capitalized on the balance sheet of the lessee under generally
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accepted accounting principles but not including any indebtedness or
obligations for which recourse is limited to property purchased) in an
aggregate principal amount in excess of $10,000,000 or under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any indebtedness for money borrowed by CRIIMI MAE
(including such leases but not including such indebtedness or obligations for
which recourse is limited to property purchased) in an aggregate principal
amount in excess of $10,000,000 by CRIIMI MAE, whether such indebtedness now
exists or shall hereafter be created which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable or such obligations being
accelerated, without such acceleration having been rescinded or annulled; (f)
certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of CRIIMI MAE or any
Significant Subsidiary or either of its properties; and (g) any other Event of
Default provided with respect to a particular series of Debt Securities. The
term "Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act) of CRIIMI MAE.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than a majority in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) of all the Debt Securities of
that series to be due and payable immediately by written notice thereof to
CRIIMI MAE (and to the applicable Trustee if given by the holders). However,
at any time after such a declaration of acceleration with respect to Debt
Securities of such series (or of all Debt Securities then outstanding under
the Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable
Trustee, the holders of not less than a majority in principal amount of
outstanding Debt Securities of such series (or of all Debt Securities then
outstanding under the Indenture, as the case may be) may rescind and annul
such declaration and its consequences if (a) CRIIMI MAE shall have paid or
deposited with the applicable Trustee all required payments of the principal
of (and premium, if any) and interest on the Debt Securities of such series
(or of all Debt Securities then outstanding under the applicable Indenture, as
the case may be), plus certain fees, expenses, disbursements and advances of
the applicable Trustee and (b) all Events of Default, other than the non-
payment of accelerated principal (or specified portion thereof), with respect
to Debt Securities of such series (or of all Debt Securities then outstanding
under the Indenture, as the case may be) have been cured or waived as provided
in the Indenture. The Indenture will also provide that the holders of not less
than a majority in principal amount of the outstanding Debt Securities of any
series (or of all Debt Securities then outstanding under the Indenture, as the
case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (y) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security affected thereby.
Each Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the holders of any series of Debt Securities of any default
with respect to such series (except a default in the payment of the principal
of (or premium, if any) or interest on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
such series) if designated officers of such Trustee consider such withholding
to be in the interest of such holders.
The right of any holder to institute a proceeding with respect to the
Indenture will be subject to certain conditions precedent including notice and
indemnity to the Trustee, but the holder has an absolute right to receipt of
principal of (and premium, if any) and interest on such holder's Debt Security
on or after the respective due dates expressed in the Debt Security, and to
institute suit for the enforcement of any such payments.
Subject to provisions in the Indenture relating to its duties in case of
default, no Trustee will be under an obligation to exercise any of its rights
or powers under the Indenture at the request or direction of any holders of
any series of Debt Securities then outstanding under the Indenture, unless
such holders shall have offered to the
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Trustee thereunder reasonable security or indemnity. The holders of not less
than a majority in aggregate principal amount of the outstanding Debt
Securities of any series (or of all Debt Securities then outstanding under the
Indenture, as the case may be) shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
applicable Trustee, or of exercising any trust or power conferred upon such
Trustee. However, each Trustee may refuse to follow any direction which is in
conflict with any law or the Indenture, which may involve such Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, CRIIMI MAE will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made only with the
consent of the holders of not less than a majority in aggregate principal
amount of all outstanding Debt Securities issued under such Indenture which
are affected by such modification or amendment; provided, however, that no
such modification or amendment may, without the consent of the holder of each
such Debt Security affected thereby, (a) change the stated maturity of the
principal of, or any installment of interest (or premium, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium payable on redemption of, any such Debt Security,
or reduce the amount of principal of an Original Issue Discount Security that
would be due and payable upon declaration of acceleration of the maturity
thereof or would be provable in bankruptcy, or adversely affect any right of
repayment of the holder of any such Debt Security; (c) change the place of
payment, or the coin or currency, for payment of principal of, premium, if
any, or interest on any such Debt Security; (d) impair the right to institute
suit for the enforcement of any payment on or with respect to any such Debt
Security; (e) reduce the above-stated percentage of outstanding Debt
Securities of any series necessary to modify or amend the Indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements set
forth in the Indenture; or (f) modify any of the foregoing provisions or any
of the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the holder of such Debt Security.
The holders of not less than a majority in principal amount of outstanding
Debt Securities issued under the Indenture have the right to waive compliance
by CRIIMI MAE with certain covenants in such Indenture.
Modifications and amendments of the Indenture may be made by CRIIMI MAE and
the respective Trustee thereunder without the consent of any holder of Debt
Securities for any of the following purposes: (i) to evidence the succession
of another person to CRIIMI MAE as obligor under such Indenture; (ii) to add
to the covenants of CRIIMI MAE for the benefit of the holders of all or any
series of Debt Securities or to surrender any right or power conferred upon
CRIIMI MAE in such Indenture; (iii) to add Events of Default for the benefit
of the holders of all or any series of Debt Securities; (iv) to add or change
any provisions of the Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, provided
that such action shall not adversely affect the interests of the holders of
the Debt Securities of any series in any material respect; (v) to change or
eliminate any provisions of the Indenture, provided that any such change or
elimination shall become effective only when there are no Debt Securities
outstanding of any series created prior thereto which are entitled to the
benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Common Shares and/or Preferred Shares; (viii) to provide for
the acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under the Indenture by more than one Trustee;
(ix) to cure any ambiguity, defect or inconsistency in the Indenture, provided
that such action shall not adversely affect the interests of holders of Debt
Securities of any series issued under such Indenture in any material respect;
or (x) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance and
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discharge of any series of such Debt Securities, provided that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect.
The Indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof, (ii) the principal
amount of a Debt Security denominated in a foreign currency that shall be
deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an Indexed Security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to the Indenture, and (iv) Debt Securities owned by CRIIMI
MAE or any other obligor upon the Debt Securities or any affiliate of CRIIMI
MAE or of such other obligor shall be disregarded.
The Indenture will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting may be called at any time by the
applicable Trustee, and also, upon request, by CRIIMI MAE or the holders of at
least 25% in principal amount of the outstanding Debt Securities of such
series, in any such case upon notice given as provided in the Indenture.
Except for any consent that must be given by the holder of each Debt Security
affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the
holders of a majority in principal amount of the outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the holders of a specified percentage, which is less than a majority, in
principal amount of the outstanding Debt Securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of the holders of such specified percentage in
principal amount of the outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may
be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by
the holders of a specified percentage in principal amount of all outstanding
Debt Securities affected thereby, or of the holders of such series and one or
more additional series: (i) there shall be no minimum quorum requirement for
such meeting and (ii) the principal amount of the outstanding Debt Securities
of such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under the
Indenture.
SUBORDINATION
Upon any distribution to creditors of CRIIMI MAE in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Debt Securities will be subordinated in right of payment to the prior
payment in full of all "Senior Debt" (as defined below), but the obligation of
CRIIMI MAE to make
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payment of the principal of (or premium, if any) and interest on the Debt
Securities will not otherwise be affected. No payment of principal or interest
may be made on the Debt Securities at any time if a default on Senior Debt
exists that permits the holders of such Senior Debt to accelerate its maturity
and the default is the subject of judicial proceedings or CRIIMI MAE receives
notice of the default. After all Senior Debt is paid in full and until the
Debt Securities are paid in full, holders will be subrogated to the rights of
holders of Senior Debt to the extent that distributions otherwise payable to
holders of the Debt Securities have been applied to the payment of Senior
Debt. By reason of such subordination, in the event of a distribution of
assets upon insolvency, certain general creditors of CRIIMI MAE may recover
more, ratably, than holders of the Debt Securities.
"Senior Debt" will be defined in the Indenture as the principal of and
interest on, or substantially similar payments to be made by CRIIMI MAE in
respect of, the following, whether outstanding at the date of execution of the
Indenture or thereafter incurred, created or assumed: (a) indebtedness of
CRIIMI MAE for money borrowed or represented by purchase-money obligations or
obligations arising under repurchase agreements, (b) indebtedness of CRIIMI
MAE evidenced by notes, debentures, or bonds, or other securities issued under
the provisions of an indenture, fiscal agency agreement or other instrument,
(c) obligations of CRIIMI MAE as lessee under leases of property either made
as part of any sale and leaseback transaction to which CRIIMI MAE is a party
or otherwise, (d) indebtedness of any partnerships or joint ventures which is
included in the consolidated financial statements of CRIIMI MAE, (e)
indebtedness, obligations and liabilities of others in respect of which CRIIMI
MAE is liable contingently or otherwise to pay or advance money or property or
as guarantor, endorser or otherwise or which CRIIMI MAE has agreed to purchase
or otherwise acquire, and (f) any binding commitment of CRIIMI MAE to fund any
mortgage investment or to fund any investment in any entity making such
mortgage investment, in each case other than (1) any such indebtedness,
obligation or liability referred to in clauses (a) through (f) above as to
which, in the instrument creating or evidencing the same pursuant to which the
same is outstanding, it is provided that such indebtedness, obligation or
liability is not superior in right of payment to the Debt Securities or rank
pari passu with the Debt Securities, (2) any such indebtedness, obligation or
liability which is subordinated to indebtedness of CRIIMI MAE to substantially
the same extent as or to a greater extent than the Debt Securities are
subordinated, and (3) the Debt Securities. There will be no restrictions in
the Indenture upon the creation of additional Senior Debt.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under the Indenture, CRIIMI MAE will be able to discharge certain
obligations to holders of any series of Debt Securities issued thereunder that
have not already been delivered to the applicable Trustee for cancellation and
that either have become due and payable or will become due and payable within
one year (or scheduled for redemption within one year) by irrevocably
depositing with the applicable Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are payable in an amount sufficient to pay the
entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or
redemption date, as the case may be.
The Indenture will provide that, under certain circumstances, CRIIMI MAE may
elect either (a) to defease and be discharged from any and all obligations
with respect to such Debt Securities (except for the obligation to pay
additional amounts, if any, upon the occurrence of certain events of tax,
assessment or governmental charge with respect to payments on such Debt
Securities and the obligations to register the transfer or exchange of such
Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (b) to
be released from its obligations with respect to such Debt Securities under
the Indenture or, under certain circumstances, its obligations with respect to
any other covenant, and any omission to comply with such obligations shall not
constitute a default or an Event of Default with respect to such Debt
Securities ("covenant defeasance"), in either case upon the irrevocable
deposit by CRIIMI MAE with the applicable Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance
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with their terms will provide money in an amount sufficient to pay the
principal of (and premium, if any) and interest on such Debt Securities, and
any mandatory sinking fund or analogous payments thereon, on the scheduled due
dates therefor.
Such a trust may be established only if, among other things, CRIIMI MAE has
delivered to the applicable Trustee an opinion of counsel (as specified in
each Indenture) to the effect that the holders of such Debt Securities will
not recognize income, gain or loss for U.S. federal income tax purposes as a
result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such opinion of counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable U.S. federal income tax law occurring after the date of
the Indenture.
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the foreign currency in which the Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
CRIIMI MAE has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal of (and premium, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited
in respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (i) a currency,
currency unit or composite currency both by the government of the country
which issued such currency and for the settlement of transactions by a central
bank or other public institutions of or within the international banking
community, (ii) the European Currency Unit ("ECU") both within the European
Monetary System established by the Resolution of December 5, 1978 of the
council of the European Economic Community, European Coal and Steel Community
and the European Atomic Energy Community (collectively, the "European
Communities") and for the settlement of transactions by public institutions of
or within the European Communities or (iii) any currency unit or composite
currency other than the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications of the provisions described above, with respect to the Debt
Securities of or within a particular series.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares and/or
Preferred Shares, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders or CRIIMI MAE, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Debt Securities.
To protect CRIIMI MAE's status as a REIT, CRIIMI MAE may refuse to effect a
conversion of the Debt Securities if, as a result of such conversion, any
person would beneficially own, either directly or indirectly, more than 9.8%
of CRIIMI MAE's outstanding capital stock. See "Description of Capital Stock--
Common Shares--Restrictions on Ownership and Transfer."
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of CRIIMI MAE comprises 60 million Common
Shares and 25 million Preferred Shares.
PREFERRED SHARES
General. The following description of the Preferred Shares sets forth
certain general terms and provisions of the Preferred Shares to which any
Prospectus Supplement may relate. The statements below describing the
Preferred Shares are in all respects subject to and qualified in their
entirety by reference to the applicable provisions of CRIIMI MAE's Articles of
Incorporation, as amended (the "Articles of Incorporation") and Bylaws and
applicable articles supplementary relating to any offering of Preferred Shares
("Articles Supplementary"). If Preferred Shares are to be issued, a
description of the terms of such Preferred Shares (as well as the form of
Preferred Share certificate) will be filed by CRIIMI MAE as an exhibit to a
current report on Form 8-K and incorporated by reference.
Terms. Subject to the limitations prescribed by the Articles of
Incorporation, the Board is authorized to fix the number of shares
constituting each series of Preferred Shares and the designations and powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution of the Board. The Preferred Shares will,
when issued, be fully paid and nonassessable by CRIIMI MAE and will have no
preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Shares;
(2) The number of such Preferred Shares offered, the liquidation
preference per share and the offering price of such Preferred Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Shares;
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(4) The date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares, including the conversion
price (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(11) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(12) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of CRIIMI MAE;
(13) Any limitations on issuance of any series of Preferred Shares
ranking senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of CRIIMI MAE; and
(14) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
CRIIMI MAE as a REIT.
Rank. Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of CRIIMI MAE, rank (i) senior to all classes or
series of Common Shares and to all equity securities ranking junior to such
Preferred Shares with respect to dividend rights or rights upon liquidation,
dissolution or winding up of CRIIMI MAE; (ii) on a parity with all equity
securities issued by CRIIMI MAE the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Shares with respect
to dividend rights or rights upon liquidation, dissolution or winding up of
CRIIMI MAE; and (iii) junior to all equity securities issued by CRIIMI MAE the
terms of which specifically provide that such equity securities rank senior to
the Preferred Shares with respect to dividend rights or rights upon
liquidation, dissolution or winding up of CRIIMI MAE. The term "equity
securities" does not include convertible debt securities.
Dividends. Holders of the Preferred Shares of each series will be entitled
to receive, when, as and if declared by the Board, out of assets of CRIIMI MAE
legally available for payment, cash dividends at such rates and on such dates
as will be set forth in the applicable Prospectus Supplement. Each such
dividend shall be payable to holders of record as they appear on the share
transfer books of CRIIMI MAE on such record dates as shall be fixed by the
Board.
Dividends on any series of the Preferred Shares may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board fails to declare a dividend
payable on a dividend payment date on any series of the Preferred Shares for
which dividends are noncumulative, then the holders of such series of the
Preferred Shares will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and CRIIMI MAE will have
no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
If Preferred Shares of any series are outstanding, full dividends will not
be declared or paid or set apart for payment on the Preferred Shares of any
other series ranking, as to dividends, on a parity with the Preferred Shares
of such series, and no dividends will be declared or paid or set apart for
payment on the Preferred Shares of any other series ranking, as to dividends,
junior to the Preferred Shares of such series for any period unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends have been or contemporaneously are declared and paid or declared and
a sum sufficient for the payment thereof set apart for such payment on the
Preferred Shares of such series for all past dividend periods and the then
current dividend
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period or (ii) if such series of Preferred Shares does not have a cumulative
dividend, full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Shares of any series and the
shares of any other series of Preferred Shares ranking on a parity as to
dividends with the Preferred Shares of such series, all dividends declared
upon Preferred Shares of such series and any other series of Preferred Shares
ranking on a parity as to dividends with such Preferred Shares shall be
declared pro rata so that the amount of dividends declared per Preferred Share
of such series and such other series of Preferred Shares shall in all cases
bear to each other the same ratio that accrued dividends per share on the
Preferred Shares of such series (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred
Shares do not have a cumulative dividend) and such other series of Preferred
Shares bear to each other.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series of Preferred Shares
does not have a cumulative dividend, full dividends on the Preferred Shares of
such series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, no dividends (other than in Common Shares or
other capital shares ranking junior to the Preferred Shares of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the Common
Shares, or any other capital shares of CRIIMI MAE ranking junior to or on a
parity with the Preferred Shares of such series as to dividends or upon
liquidation, nor shall any Common Shares, or any other capital shares of
CRIIMI MAE ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for
a sinking fund for the redemption of any such shares) by CRIIMI MAE (except by
conversion into or exchange for other capital shares of CRIIMI MAE ranking
junior to the Preferred Shares of such series as to dividends and upon
liquidation).
Any dividend payment made on shares of a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
Redemption. If so provided in the applicable Prospectus Supplement, the
Preferred Shares will be subject to mandatory redemption or redemption at the
option of CRIIMI MAE, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by CRIIMI MAE in each year commencing after a
date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Shares do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Shares of any series is payable only
from the net proceeds of the issuance of capital shares of CRIIMI MAE, the
terms of such Preferred Shares may provide that, if no such capital shares
shall have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Shares shall automatically and mandatorily be converted into the
applicable capital shares of CRIIMI MAE pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart
for payment for all past
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dividend periods and the then current dividend period and (ii) if such series
of Preferred Shares does not have a cumulative dividend, full dividends on the
Preferred Shares of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, no shares of any series of
Preferred Shares shall be redeemed (unless all outstanding Preferred Shares of
such series are simultaneously redeemed) or directly or indirectly purchased
or acquired (except by conversion into or exchange for capital shares of
CRIIMI MAE ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall
not prevent the purchase or acquisition of Preferred Shares of such series to
preserve the REIT status of CRIIMI MAE or pursuant to a purchase or exchange
offer made on comparable terms to holders of all outstanding Preferred Shares
of such series.
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Board and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Board.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares
of any series to be redeemed at the address shown on the share transfer books
of CRIIMI MAE. Each notice shall state: (i) the redemption date; (ii) the
number of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Shares are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the Preferred
Shares of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of Preferred Shares to be redeemed from
each such holder. If notice of redemption of any Preferred Shares has been
given and if the funds necessary for such redemption have been set aside by
CRIIMI MAE in trust for the benefit of the holders of any Preferred Shares so
called for redemption, then from and after the redemption date dividends will
cease to accrue on such Preferred Shares, such Preferred Shares shall no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. Any moneys so
deposited which remain unclaimed by the holders of the Preferred Shares at the
end of two years after the redemption date will be returned by such bank or
trust company to CRIIMI MAE.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of CRIIMI MAE, then, before any
distribution or payment shall be made to the holders of any Common Shares or
any other class or series of capital shares of CRIIMI MAE ranking junior to
the Preferred Shares in the distribution of assets upon any liquidation,
dissolution or winding up of CRIIMI MAE, the holders of each series of
Preferred Shares shall be entitled to receive out of assets of CRIIMI MAE
legally available for distribution to stockholders, liquidating distributions
in the amount of the liquidation preference per share (set forth in the
applicable Prospectus Supplement), plus an amount equal to all dividends
accrued and unpaid thereon (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred
Shares do not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of
Preferred Shares will have no right or claim to any of the remaining assets of
CRIIMI MAE. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of CRIIMI MAE are
insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Shares and the corresponding amounts payable on all
shares of other classes or series of capital shares of CRIIMI MAE ranking on a
parity with the Preferred Shares in the distribution of assets upon
liquidation, dissolution or winding up, then the holders of the Preferred
Shares and all other such classes or series of capital shares shall share
ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of CRIIMI MAE shall be distributed
among the holders of any other classes or series of capital shares ranking
junior to the Preferred Shares upon liquidation, dissolution or winding up,
according to their respective
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rights and preferences and in each case according to their respective number
of shares. For such purposes, the consolidation or merger of CRIIMI MAE with
or into any other corporation, trust or entity, or the sale, lease or
conveyance of all or substantially all of the property or business of CRIIMI
MAE, shall not be deemed to constitute a liquidation, dissolution or winding
up of CRIIMI MAE.
Voting Rights. Holders of the Preferred Shares will not have any voting
rights, except as set forth below or as otherwise from time to time required
by law or as indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Shares, so long as any
Preferred Shares remain outstanding, CRIIMI MAE will not, without the
affirmative vote or consent of the holders of at least a majority of the
shares of each series of Preferred Shares outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital shares ranking prior to such
series of Preferred Shares with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital shares of CRIIMI MAE into any such shares,
or create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of CRIIMI MAE's Articles of Incorporation or the
Articles Supplementary for such series of Preferred Shares, whether by merger,
consolidation or otherwise (each, an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of such
series of Preferred Shares or the holders thereof; provided, however, with
respect to the occurrence of any of the Events set forth in (ii) above, so
long as the Preferred Shares remain outstanding with the terms thereof
materially unchanged, taking into account that upon the occurrence of an
Event, CRIIMI MAE may not be the surviving entity, the occurrence of any such
Event shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of Preferred Shares, and
provided further that (x) any increase in the amount of the authorized Common
Shares or Preferred Shares or the authorization, creation or issuance of any
other series of Preferred Shares or any other class or series of capital
shares, or (y) any increase in the amount of authorized shares of such series
or any other series of Preferred Shares or any other class or series of
capital shares, in each case ranking on a parity with or junior to the
Preferred Shares of such series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not
be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Shares shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Shares are convertible into Common Shares will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of Common Shares into which the Preferred Shares are convertible,
the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the
holders of the Preferred Shares or CRIIMI MAE, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such Preferred Shares.
Restrictions on Ownership and Transfer. As discussed below under "--Common
Shares--Restrictions on Ownership and Transfer," for CRIIMI MAE to qualify as
a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), not
more than 50% in value of its outstanding capital shares may be owned,
directly or constructively, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year. To
assist CRIIMI MAE in meeting this requirement, CRIIMI MAE may take certain
actions to limit the beneficial ownership, directly or indirectly, by a single
person of more than 9.8% of CRIIMI MAE's outstanding capital stock, including
any Preferred Shares of CRIIMI MAE. Therefore, the Articles Supplementary for
each series of Preferred Shares may contain certain provisions restricting the
ownership and transfer of the Preferred Shares. The applicable Prospectus
Supplement will specify any additional ownership limitation relating to a
series of Preferred Shares.
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COMMON SHARES
The following description of the Common Shares is summarized from relevant
portions of CRIIMI MAE's Articles of Incorporation and Bylaws, as amended. A
more complete description of the Common Shares may be obtained by reference to
such documents and to the documents incorporated by reference in this
Prospectus. The following statements are qualified in their entirety by such
reference.
General. Stockholders are entitled to one vote for each Common Share held on
all matters presented for a vote to stockholders. The Board serves in
staggered three-year terms. Directors may be removed only for cause, upon the
affirmative vote of holders of a majority of the Common Shares voting together
as a single class. Except as otherwise provided in the Articles of
Incorporation, in meetings where a quorum is present, a majority of the votes
cast by stockholders is required to adopt a provision. Stockholders are
entitled to receive all assets available for distribution to the stockholders,
subject to any preferential rights of the holders of any Preferred Shares. The
Common Shares, when issued, will be fully paid and nonassessable and will not
be subject to redemption, except as provided in the Articles of Incorporation,
nor will they have any preference, conversion, exchange, preemptive or
cumulative voting rights.
The transfer agent and register for the Common Shares is Registrar and
Transfer Company.
Restrictions on Ownership and Transfer. The Code provides that a corporation
may not qualify as a REIT if more than 50% in value of the shares of the
corporation are owned, directly or indirectly, by five or fewer individuals,
which for this purpose includes pension funds and certain other tax-exempt
entities. Provisions of the Articles of Incorporation, intended to prevent
concentrated ownership of the capital stock of CRIIMI MAE that might
jeopardize its qualification as a REIT, authorize the Board to refuse to
effect a transfer of shares of capital stock of CRIIMI MAE to any person who
as a result would own in excess of 9.8% of the outstanding shares of capital
stock of CRIIMI MAE ("Excess Shares") and to redeem such Excess Shares.
DESCRIPTION OF WARRANTS
CRIIMI MAE may issue Warrants for the purchase of Preferred Shares or Common
Shares. Warrants may be issued independently or together with any Debt
Securities, Preferred Shares or Common Shares, offered by any Prospectus
Supplement and may be attached to or separate from such Debt Securities,
Preferred Shares or Common Shares. Each series of Warrants will be issued
under a separate warrant agreement (a "Warrant Agreement") to be entered into
between CRIIMI MAE and a bank or trust company, as warrant agent (the "Warrant
Agent"), all as set forth in the Prospectus Supplement relating to the
particular issue of Warrants. The Warrant Agent will act solely as an agent of
CRIIMI MAE in connection with the Warrants and will not assume any obligation
or relationship of agency or trust for or with any holders of Warrants or
beneficial owners of Warrants. If Warrants are to be issued, a copy of the
form of Warrant Agreement will be filed by CRIIMI MAE as an exhibit to a
current report on Form 8-K and incorporated herein by reference. The following
summary of certain provisions of the form of Warrant Agreement does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the applicable Warrant Agreement.
General. If Warrants are offered, the related Prospectus Supplement will
describe the Warrant Agreement and the terms of the Warrants, including the
following: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued;
(iv) the currencies in which the price or prices of such Warrants may be
payable; (v) the designation, amount and terms of the Preferred Shares and/or
Common Shares purchasable upon exercise of such Warrants; (vi) the designation
and terms of the Debt Securities, Preferred Shares and/or Common Shares, if
any, with which such Warrants are issued and the number of such Warrants
issued with each such Security; (vii) if applicable, the date on and after
which such Warrants and the Preferred Shares and/or Common Shares purchasable
upon exercise of such Warrants will be separately transferable; (viii) the
price or prices at which and the currency or currencies in which the Preferred
Shares and/or Common Shares purchasable upon exercise of such Warrants may be
purchased; (ix) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire; (x) the minimum and
maximum amount of such Warrants which may be exercised at any one time; (xi)
information with respect to
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book-entry procedures, if any; (xii) a discussion of certain United States
federal income tax considerations; and (xiii) any other material terms of such
Warrants, including terms, procedures and limitations relating to exchange or
exercise of such Warrants.
Exercise. Prior to the exercise of any Warrants to purchase Preferred Shares
and/or Common Shares, holders of such Warrants will not have any of the rights
of holders of Preferred Shares or Common Shares, as the case may be,
purchasable upon such exercise, including the right to receive payments of
dividends, if any, on the Preferred Shares or Common Shares purchasable upon
such exercise, or to exercise any applicable right to vote.
Each Warrant will entitle the holder to purchase Preferred Shares and/or
Common Shares at such exercise price as shall in each case be set forth in, or
calculable from, the Prospectus Supplement relating to the Warrants. Warrants
may be exercised at any time up to 5:00 P.M. New York time on the expiration
date set forth in the Prospectus Supplement relating to such Warrants. After
the close of business on the expiration date (or such later date to which such
expiration date may be extended by CRIIMI MAE), unexercised Warrants will
become void.
Restrictions on Ownership and Transfer. As discussed above under "--Common
Shares--Restrictions on Ownership and Transfer," for CRIIMI MAE to qualify as
a REIT under the Code, not more than 50% in value of its outstanding capital
shares may be owned, directly or constructively, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist CRIIMI MAE in meeting this requirement, CRIIMI MAE may
take certain actions to limit the beneficial ownership, directly or
indirectly, by a single person of more than 9.8% of CRIIMI MAE's outstanding
capital stock. An individual or entity that owns Warrants to acquire Common
Shares and/or Preferred Shares will be deemed to own such Common Shares or
Preferred Shares for purposes of meeting the ownership requirement. Therefore,
the terms of any Warrant Agreement entered into in connection with the
issuance of Warrants may contain certain provisions restricting the ownership
and transfer of the Warrants. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to the Warrants.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax
considerations to CRIIMI MAE is based on current law, is for general
information only, and is not tax advice. The tax treatment of a holder of any
of the Securities will vary depending upon the terms of the specific
Securities acquired by such holder, as well as such holder's particular
situation, and this discussion does not attempt to address any aspects of
United States federal income taxation relating to holders of Securities.
Certain United States federal income tax considerations relevant to holders of
the Securities will be provided in the applicable Prospectus Supplement
relating thereto.
This discussion does not consider specific facts and circumstances that may
be relevant to a particular holder's tax position, and does not consider U.S.
state and local or non-U.S. tax consequences. Furthermore, the following
discussion is based on provisions of the Code and administrative and judicial
interpretations, all of which are subject to change, possibly on a retroactive
basis.
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS
WELL AS HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OF THE
ACQUISITION, OWNERSHIP AND SALE OF THE SECURITIES, INCLUDING THE FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
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CRIIMI MAE has qualified, and intends to continue to qualify, as a REIT
under the Code. Qualification for treatment as a REIT requires CRIIMI MAE to
meet certain criteria including certain requirements regarding the nature of
its ownership, assets, income and distributions of taxable income. A REIT
generally is not subject to federal income tax on that portion of its ordinary
income or capital gains that is distributed currently to stockholders. CRIIMI
MAE has distributed and intends to continue to distribute substantially all of
its taxable income to stockholders and to meet distribution requirements to
continue to qualify as a REIT. CRIIMI MAE will generally be subject to federal
income tax at normal corporate rates on its undistributed income and to a 4%
excise tax under the Code on the amount, if any, by which 85% of its REIT
taxable income (including accrued but unpaid interest income) and 95% of any
net capital gain exceed the amount actually distributed to its stockholders
during the year (or declared as a dividend during October, November or
December of a calendar year, if distributed during the following January as
ordinary income dividends). Accrued income for the last month of each quarter
is generally received within 30 days after the end of the quarter. CRIIMI MAE
is not aware of any present circumstances that would cause it to fail to
qualify as a REIT, nor does it anticipate any such circumstances in the
reasonably foreseeable future. If the U.S. Internal Revenue Service ("IRS")
successfully challenged the tax status of CRIIMI MAE as a REIT, CRIIMI MAE's
earnings would become subject to federal income tax (including any applicable
minimum tax) at corporate rates.
To assist in maintaining CRIIMI MAE's qualification as a REIT under the
Code, CRIIMI MAE's Articles of Incorporation provide that no person or persons
acting as a group (defined to include partnerships, corporations, trusts and
other entities), with the exception of C.R.I., Inc. or its affiliates, shall
at any time directly or indirectly acquire ownership of more than 9.8% of the
outstanding shares of CRIIMI MAE's capital stock.
PLAN OF DISTRIBUTION
CRIIMI MAE may sell Securities to or through one or more underwriters, and
also may sell Securities directly to other purchasers or through agents. The
distribution of the Securities may be effected from time to time in one or
more transactions, at a fixed price or prices which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. If underwriters are used in the sale of
Securities, the Securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions. If the Securities are sold through one or
more agents, as designated by CRIIMI MAE from time to time, any such agent
will be acting on a best efforts basis for the period of its appointment.
In connection with the sale of Securities, underwriters may receive
compensation from CRIIMI MAE or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions
from the underwriters (which may be all or a portion of the discount to be
received by such underwriter from CRIIMI MAE) and/or commissions from the
purchasers for whom they may act as agents. Underwriters, dealers, and agents
that participate in the distribution of Securities may be deemed to be
underwriters, and any discounts or commissions they receive from CRIIMI MAE,
and any profit on the resale of Securities they realize may be deemed to be
underwriting discounts and commissions, under the Securities Act. Any such
underwriter or agent will be identified, and any such compensation received
from CRIIMI MAE will be described, in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other
than the Common Shares which are listed on the NYSE. Any Common Shares sold
pursuant to a Prospectus Supplement are expected to be listed on such
exchange, subject to official notice of issuance. CRIIMI MAE may elect to list
any series of Debt Securities, Preferred Shares or Warrants on a securities
exchange, but is not obligated to do so. It is possible that one or more
underwriters may make a market in a series of Securities, but will not be
obligated to do so and may discontinue any market making at any time without
notice. Therefore, no assurance can be given as to the liquidity of the
trading market for any Securities (other than Common Shares).
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Under agreements CRIIMI MAE may enter into, underwriters, dealers, and
agents who participate in the distribution of Securities may be entitled to
indemnification by CRIIMI MAE against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, CRIIMI MAE in the ordinary course of
business. In connection with any particular issue of Debt Securities, CRIIMI
MAE may enter into hedging transactions with an underwriter, dealer or agent
participating in such transaction or an affiliate thereof.
If so indicated in the Prospectus Supplement, CRIIMI MAE will authorize
underwriters or other persons acting as CRIIMI MAE's agents to solicit offers
by certain institutions to purchase Securities from CRIIMI MAE pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by CRIIMI MAE. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of the Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL MATTERS
Certain matters relating to the validity of the Securities will be passed
upon for CRIIMI MAE by Swidler & Berlin, Chartered, Washington, D.C.
EXPERTS
The financial statements and schedules included in CRIIMI MAE's Annual
Report on Form 10-K, as amended, incorporated herein by reference, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in its reports with respect thereto, and have been incorporated by reference
herein in reliance upon the authority of said firm as experts in accounting
and auditing.
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NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY
OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE SECURITIES OFFERED HEREBY, NOR
DO THEY CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE INFORMATION
CONTAINED HEREIN OR IN THE AFFAIRS OF CRIIMI MAE SINCE THE DATE HEREOF.
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TABLE OF CONTENTS
PAGE
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Available Information................................................. 2
Incorporation of Certain Documents by Reference....................... 2
CRIIMI MAE............................................................ 3
Use of Proceeds....................................................... 3
Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges
and Preferred Stock Dividends........................................ 3
Description of Debt Securities........................................ 3
Description of Capital Stock.......................................... 13
Description of Warrants............................................... 18
Certain United States Federal Income Tax Considerations............... 19
Plan of Distribution.................................................. 20
Legal Matters......................................................... 21
Experts............................................................... 21
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CRIIMI MAE INC.
$300,000,000
DEBT SECURITIES, PREFERRED SHARES,
COMMON SHARES AND WARRANTS
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PROSPECTUS
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June 6, 1997
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