<PAGE>
EXHIBIT 99.4
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
Greenbelt Division
---------------------------------------
)
)
In re )
)
CRIIMI MAE Inc., et al., ) Chapter 11
) Case Nos. 98-2-3115(DK)
Debtors. ) through 98-2-3117(DK)
) (Jointly Administered)
)
---------------------------------------
PRAECIPE FILING FURTHER SUBSTITUTED PAGES TO THE DEBTORS'
SECOND AMENDED JOINT DISCLOSURE STATEMENT
In connection with the hearing on approval of the Debtors'
Second Amended Joint Disclosure Statement (the "Disclosure Statement') held on
April 25, 2000, CRIIMI MAE Inc. ("CMI"), CRIIMI MAE Holdings II, L.P.
("Holdings") and CRIIMI MAE Management, Inc. ("Management") (collectively, the
"Debtors") and the Official Committee of Equity Security Holders of CMI (the
"Equity Committee"), by and through their undersigned counsel, hereby file this
Praecipe Filing Further Substituted Pages to the Debtors' Second Amended Joint
Disclosure Statement.
Attached hereto as Exhibit 1 are further replacement pages to
be substituted into the Disclosure Statement filed on April 25, 2000 as
supplemented by the replacement pages filed herein by Praecipe on July 13, 2000.
Approval of the Disclosure Statement including the replacement pages filed
herewith and filed with the Praecipe previously filed on July 13, 2000 is
<PAGE>
hereby requested. To the extent of any overlap in changes, the replacement pages
filed herewith shall control.
Dated: July 21, 2000
VENABLE, BAETJER AND AKIN, GUMP, STRAUSS,
HOWARD, LLP HAUER & FELD, L.L.P.
By: /s/ By: /s/
-------------------------- -----------------------------
Richard L. Wasserman Stanley J. Samorajczyk
Federal Bar No. 02784 Federal Bar No. 03113
Carrie B. Weinfeld 1333 New Hampshire Ave., NW
Federal Bar No. 25365 Washington, D.C. 20036
1800 Mercantile Bank and Trust Building (202) 887-4000
Two Hopkins Plaza
Baltimore, Maryland 21201 Co-Counsel for CRIIMI MAE Inc.
(410) 244-7400 and CRIIMI MAE Holdings II, L.P.,
Debtors-in-Possession
Co-Counsel for CRIIMI MAE Inc.
and CRIIMI MAE Holdings II, L.P.,
Debtors-in-Possession
SHULMAN, ROGERS, GANDAL, COVINGTON & BURLING
PORDY & ECKER, P.A.
By: /s/ By: /s/
-------------------------- -----------------------------
Morton A. Faller Michael St. Patrick Baxter
Federal Bar No. 01488 Federal Bar No. 09694
11921 Rockville Pike Dennis B. Auerbach
Third Floor Federal Bar No. 09290
Rockville, MD 20852-2753 1201 Pennsylvania Avenue, N.W.
(301) 231-0928 Washington, D.C. 20044
(202) 662-6000
Counsel for CRIIMI MAE
Management, Inc., Counsel for the Official Committee
Debtor-in-Possession of Equity Security Holders of
CRIIMI MAE Inc.
-2-
<PAGE>
FURTHER SUBSTITUTED PAGES TO THE
DEBTORS' SECOND AMENDED JOINT DISCLOSURE STATEMENT
EXHIBIT 1
_________
<PAGE>
THIS IS NOT A SOLICITATION OF ACCEPTANCE OR REJECTION OF THE THIRD AMENDED JOINT
PLAN OF REORGANIZATION OF CRIIMI MAE INC., CRIIMI MAE MANAGEMENT, INC. AND
CRIIMI MAE HOLDINGS II, L.P. (COLLECTIVELY, THE "DEBTORS"). ACCEPTANCES OR
REJECTIONS MAY NOT BE SOLICITED BY THE DEBTORS UNTIL A DISCLOSURE STATEMENT HAS
BEEN APPROVED BY THE BANKRUPTCY COURT. THIS SECOND AMENDED JOINT DISCLOSURE
STATEMENT IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE
BANKRUPTCY COURT. IT IS THEREFORE NOTED AS "PROPOSED," WHICH NOTATION WILL BE
REMOVED AFTER APPROVAL BY THE BANKRUPTCY COURT.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MARYLAND
GREENBELT DIVISION
_____________________________
)
IN RE ) CHAPTER 11
)
CRIIMI MAE INC., ET AL., )
) CASE NOS. 98-2-3115 THROUGH 98-2-3117 (DK)
DEBTORS. ) (JOINTLY ADMINISTERED)
)
_____________________________
DEBTORS' SECOND AMENDED JOINT DISCLOSURE STATEMENT
__________________________________________________
[PROPOSED]
<TABLE>
<S> <C>
VENABLE, BAETJER AND HOWARD, LLP AKIN, GUMP, STRAUSS, HAUER & FELD, LLP
Richard L. Wasserman Stanley J. Samorajczyk
Gregory A. Cross Michael S. Stamer
1800 Mercantile Bank &Trust Building 1333 New Hampshire Avenue, N.W.
Two Hopkins Plaza Washington, D.C. 20036
Baltimore, Maryland 21201 (202) 887-4000
(410) 244-7400
Co-Counsel to CRIIMI MAE Inc. and
CRIIMI MAE Holdings II, L.P.
SHULMAN, ROGERS, GANDAL, PORDY & ECKER, P.A. COVINGTON & BURLING
Morton A. Faller Michael St. Patrick Baxter
11921 Rockville Pike Dennis B. Auerbach
Third Floor 1201 Pennsylvania Avenue, N.W.
Rockville, MD 20852-2753 Washington, D.C. 20044
(301) 231-0928 (202) 662-6000
Counsel to CRIIMI MAE Management, Inc. Counsel to the Official Committee of Equity
Security Holders of CRIIMI MAE Inc.
</TABLE>
Dated: July ___, 2000
IMPORTANT: THIS SECOND AMENDED JOINT DISCLOSURE STATEMENT CONTAINS INFORMATION
THAT MAY BEAR UPON YOUR DECISION TO ACCEPT OR REJECT THE DEBTORS' THIRD AMENDED
JOINT PLAN OF REORGANIZATION. PLEASE READ THIS DOCUMENT WITH CARE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
I. INTRODUCTION .............................................................................................2
II. PLAN SUMMARY AND KEY CONSIDERATIONS ......................................................................4
A. Plan Summary .........................................................................................5
B. Recommendation ......................................................................................17
C. Voting Instructions .................................................................................18
III. GENERAL INFORMATION..................................................................................20
A. The Debtors and Chapter 11 Filing and Other Chapter 11 Events........................................21
B. Business.............................................................................................26
C. The Portfolio........................................................................................34
D. Legal Proceedings....................................................................................38
E. Selected Historical Consolidated Financial Data......................................................47
F. Management's Discussion and Analysis of Financial Condition and Results of Operations................49
G. Quantitative and Qualitative Disclosures About Market Risk...........................................62
H. Market and Trading Information.......................................................................64
I. Management...........................................................................................65
IV. BUSINESS PLAN........................................................................................73
V. PLAN OF REORGANIZATION ..............................................................................75
A. Overview of the Plan ................................................................................75
B. Treatment of Claims and Interests Under the Plan ...................................................80
C. Confirmation and Effective Date Conditions ..........................................................90
D. The Reorganized Debtors .............................................................................91
E. Recapitalization Financing Including Issuance of New Securities......................................93
F. Sale of the CMBS Portfolio...........................................................................93
G. Affiliate Reorganization.............................................................................94
H. Potential New Equity Investment and Rights Offering .................................................94
I. Distributions Under the Plan ........................................................................97
J. General Information Concerning the Plan ............................................................100
VI. CONFIRMATION AND CONSUMMATION PROCEDURES ...............................................................108
A. Solicitation of Acceptances ........................................................................108
B. Confirmation Hearing ...............................................................................108
C. Confirmation .......................................................................................109
D. Consummation .......................................................................................113
E. Conditions to Effective Date .......................................................................113
VII. CERTAIN RISK FACTORS....................................................................................113
VIII. CERTAIN FEDERAL INCOME TAX CONSIDERATIONS .............................................................122
IX. ALTERNATIVES TO CONFIRMATION AND CONSUMMATION OF THE PLAN ..............................................127
A. Alternative Chapter 11 Plans .......................................................................127
B. Liquidation Under Chapter 7 ........................................................................127
X. CONCLUSION AND RECOMMENDATION ..........................................................................127
</TABLE>
ii
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EXHIBITS
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<CAPTION>
PAGE
<S> <C> <C>
Exhibit A Third Amended Joint Plan of Reorganization of CRIIMI MAE Inc., CRIIMI MAE
Management, Inc. and CRIIMI MAE Holdings II, L.P. Under
Chapter 11 of the Bankruptcy Code..............................................................A-1
Exhibit B Unaudited Pro Forma Consolidated Financial Statements and
Projected Financial Information...........................................................B-1
Exhibit C Liquidation Analysis ..........................................................................C-1
Exhibit D CRIIMI MAE Financial Statements from Form 10-K for the Year Ended December 31, 1999............D-1
Exhibit E Reorganized CMI Amended and Restated Articles of Incorporation.................................E-1
Exhibit F Reorganized CMI Amended and Restated Bylaws....................................................F-1
Exhibit G Reorganized CMI Second Amended and Restated Stock Option Plan for Key Employees................G-1
Exhibit H Quarterly Report on Form 10-Q for the Quarter ended March 31, 2000.............................H-1
</TABLE>
iii
<PAGE>
A. PLAN SUMMARY
The Plan contemplates the payment in full of all of the Allowed Claims
of CMI, CMM and Holdings primarily through recapitalization financing
aggregating at least $857 million (the "Recapitalization Financing"). A
significant portion of such Recapitalization Financing is expected to consist of
debt financing from existing debtholders (the "New Debt") and the balance is
expected to result from the sale of selected CMBS (the "CMBS Sale") and the
Company's interest in CMO-IV (the "CMO-IV Sale"). In particular, CMI has agreed
to restructure its secured debt with two of its largest creditors, Merrill Lynch
Mortgage Capital Inc. ("Merrill") and German American Capital Corporation
("GACC"), in accordance with the term sheet attached as Exhibit 1 to the Plan
(the "Merrill/GACC Term Sheet"). In addition, CMI has agreed with the Unsecured
Creditors' Committee to restructure its unsecured debt including its Old Senior
Notes in accordance with the term sheet attached as Exhibit 2 to the Plan (the
"Unsecured Creditors' Term Sheet"). The Merrill/GACC and Unsecured Creditors
restructurings set forth in Exhibits 1 and 2 to the Plan are the cornerstones of
CMI's New Debt financing as it emerges from Chapter 11 under the Debtors' Plan.
Although not required to fund the Plan, the Debtors may seek new equity capital
from one or more investors to partially fund the Plan. Any such new equity will
constitute Recapitalization Financing. See "PLAN OF REORGANIZATION" for a
further discussion of potential new equity capital.
The Plan provides for distributions to creditors as summarized below:
CLAIMS AGAINST AND INTERESTS IN CMI
<TABLE>
<CAPTION>
---------- ------------------------------------------------- -------------------------------------------- ------------
CLASS DESCRIPTION TREATMENT ESTIMATED
RECOVERY
---------- ------------------------------------------------- -------------------------------------------- ------------
<S> <C> <C> <C>
N/A Administrative Claims (Unclassified) Each Holder will be paid Cash equal to the 100%
amount of such Claim on the later of the
Effective Date or the day on which such
Claim becomes an Allowed Claim, unless (i)
the Holder and Reorganized CMI,
Reorganized CMM or Reorganized Holdings,
as the case may be, agree to other
treatment, or (ii) an order of the
Bankruptcy Court provides for other terms.
---------- ------------------------------------------------- -------------------------------------------- ------------
N/A Priority Tax Claims (Unclassified) Each Holder will receive, at the sole 100%
option of Reorganized CMI, Reorganized CMM
or Reorganized Holdings, as the case may
be, (i) Cash equal to the unpaid portion
of such Claim on the later of the
Effective Date and the date on which such
Claim becomes an Allowed Priority Tax
Claim, or (ii) equal quarterly Cash
payments in an aggregate amount equal to
such Claim, together with interest at a
fixed annual rate to be determined by the
Bankruptcy Court or otherwise agreed to by
Reorganized CMI, Reorganized CMM or
Reorganized Holdings, as the case may be,
and such Holder over a period through the
sixth anniversary of the date of
assessment of such Claim, or upon such
other terms determined by the Bankruptcy
Court.
---------- ------------------------------------------------- -------------------------------------------- ------------
</TABLE>
5
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<TABLE>
<CAPTION>
---------- ------------------------------------------------- -------------------------------------------- ------------
CLASS DESCRIPTION TREATMENT ESTIMATED
RECOVERY
---------- ------------------------------------------------- -------------------------------------------- ------------
<S> <C> <C> <C>
A1 Citicorp Secured Claims IMPAIRED. The Holder of the Allowed 100%
Class A1 Claim will receive on the
Effective Date the treatment of its Allowed
Secured Claim set forth on Exhibit 4 to
the Plan, or such other treatment as may
be agreed to by CMI and the Holder. As set
forth in Exhibit 4 to the Plan, the
treatment set forth therein resolves all
Claims of the Holder of the Allowed Class
A1 Claim and the affiliates thereof
referenced in Exhibit 4, against each of
the Debtors, the Reorganized Debtors and
CRIIMI MAE Brick Church, Inc. Class A1 is
Impaired and, accordingly, the Holder of
such Claim will be entitled to vote on the
Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
A2 First Union Secured Claim IMPAIRED. The Holder of the Allowed 100%
Class A2 Claim will receive on the
Effective Date payment in full in Cash of
---------- ------------------------------------------------- -------------------------------------------- ------------
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------- ------------------------------------------------- -------------------------------------------- ------------
A14 Series B Preferred Stock IMPAIRED. Each Holder of an Allowed 100%
Class A14 Interest as of the Effective
Date will retain its Series B Preferred
Stock; provided that if the Holders of
Series B Preferred Stock as of the Voting
Record Date vote as a Class by the
requisite amount to accept the Plan, the
Articles Supplementary relating to the
Series B Preferred Stock will be deemed
amended (and, as amended, to be part of
the Reorganized CMI Amended and Restated
Articles of Incorporation) to permit the
payment of dividends on Series B Preferred
Stock, including accrued and unpaid
dividends, in CMI Common Stock or Cash (or
a combination thereof), at the election of
Reorganized CMI, with such payment of
dividends to be consistent with Exhibits 1
and 2 to the Plan. It is contemplated
that such dividends will be paid in CMI
Common Stock. See Exhibit 2 to the Plan
regarding limitations on cash dividends.
Holders of Series B Preferred Stock who
are not affiliates or "underwriters" may
publicly trade the CMI Common Stock
issued to them on the Effective Date as
payment for dividends accrued and payable.
Class A14 is Impaired and, accordingly, is
entitled to vote on the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
A15 Series B Preferred Stock Securities Claims UNIMPAIRED. Each Holder (if any) of an 100%
Allowed Class A15 Claim will, if, as and
when any such Claim is Allowed by Final
Order, receive in full satisfaction of any
such Allowed Class A15 Claim its share of
any Insurance Proceeds applicable thereto
plus, if such Allowed Class A15 Claim (if
any) is not paid in full from such
Insurance Proceeds, CMI Common Stock in an
amount equal in value, as of the date of
issuance thereof, to the balance (if any)
of such Allowed Class A15 Claim, provided
that any such Claim not timely filed (and
in any event not filed before the
Confirmation Date) shall be released and
discharged under the Plan and Confirmation
Order. Class A15 is Unimpaired and,
accordingly, is not entitled to vote on
the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
A16 Former Series C Preferred Stock IMPAIRED. Former Series C Preferred 100%
Stock has been exchanged for Series E
Preferred Stock and such Series E
---------- ------------------------------------------------- -------------------------------------------- ------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------- ------------------------------------------------- -------------------------------------------- ------------
thereof), at the election of Reorganized
CMI, with such payment of dividends to be
consistent with Exhibits 1 and 2 to the
Plan. It is possible that such dividends
may be paid in CMI Common Stock. See
Exhibit 2 to the Plan regarding
limitations on cash dividends. Holders of
Series F Dividend Preferred Stock who are
not affiliates or "underwriters" may
publicly trade the CMI Common Stock
issued to them on the Effective Date
as payment for dividends accrued and
payable. Class A20 is Impaired and,
accordingly, is entitled to vote on the
Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
A21 CMI Common Stock IMPAIRED. Each Holder of an Allowed 100%
Class A21 Interest as of the Effective
Date will retain its CMI Common Stock.
Class A21 is Impaired and, accordingly,
Holders of such Interests will be entitled
to vote on the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
A22 Stock Options UNIMPAIRED. Each Holder of a Stock 100%
Option as of the Effective Date will
retain its Stock Option. Class A22 is
Unimpaired and, accordingly, is not
entitled to vote on the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
A23 CMI Common Stock Securities Claims UNIMPAIRED. All Holders (if any) of 100%
Allowed Class A23 Claims will receive in
full satisfaction of any such Allowed
Class A23 Claims their share of any
Insurance Proceeds applicable thereto
plus, if such Allowed Class A23 Claims (if
any) are not paid in full from such
Insurance Proceeds, CMI Common Stock in an
amount equal in value, as of the date of
issuance thereof, to the balance (if any)
of such Allowed Class A23 Claims. Class
A23 is Unimpaired and, accordingly, is not
entitled to vote on the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
</TABLE>
CLAIMS AGAINST AND INTERESTS IN CMM
<TABLE>
<CAPTION>
---------- ------------------------------------------------- -------------------------------------------- ------------
CLASS DESCRIPTION TREATMENT ESTIMATED
RECOVERY
---------- ------------------------------------------------- -------------------------------------------- ------------
<S> <C> <C> <C>
</TABLE>
14
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<TABLE>
<S> <C> <C> <C>
---------- ------------------------------------------------- -------------------------------------------- ------------
C1 Citicorp Secured Claims IMPAIRED. Each Holder (if any) of 100%
any remaining Allowed Class C1 Claim
(if any) shall be included in and
satisfied as part of the treatment of the
Holder of the Allowed Class A1 Claim as
set forth on Exhibit 4 to the Plan.
Class C1 is Impaired and, accordingly, the
Holder of such Claim (if any) will be
entitled to vote on the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
C2 Other Secured Claims IMPAIRED. Each Holder (if any) of an 100%
Allowed Class C2 Claim will receive on the
Effective Date either (i) payment in full
in Cash of such Claim with interest on the
principal balance of any such Allowed
Claim calculated at the Plan Rate; (ii) if
Holdings so elects, the collateral
securing the Allowed Class C2 Claim (if
any) in full satisfaction of such Claim;
or (iii) such other treatment as may be
agreed to by Holdings and the Holder(s)
(if any) of Allowed Class C2 Claim(s).
Class C2 is Impaired and, accordingly,
Holders of such Claims will be entitled to
vote on the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
C3 Priority Claims UNIMPAIRED. Each Holder of an Allowed 100%
Class C3 Claim will receive on the
Effective Date payment in full in Cash of
such Claim including Plan Interest
thereon. Class C3 is Unimpaired and,
accordingly, is not entitled to vote on
the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
C4 Guarantee Claims UNIMPAIRED. Each Holder (if any) of an 100%
Allowed Class C4 Claim will receive if, as
and when any such Claim is allowed by
Final Order payment in Cash in full
including Plan Interest thereon if, and
only to the extent not fully treated with
respect to such Holder's underlying
Allowed Claim under the Plan treatment for
Claims against CMI or CMM, as the case may
be. Class C4 is Unimpaired and,
accordingly, is not entitled to vote on
the Plan.
---------- ------------------------------------------------- -------------------------------------------- ------------
</TABLE>
17
<PAGE>
Debtors with the Bankruptcy Court or if a claim is listed as disputed,
contingent or unliquidated, the claimant must file a proof of claim with the
Bankruptcy Court by the Bar Date or the Government Unit Bar Date, as applicable,
or the claimant may not be able to recover on its claim against the Debtors'
Chapter 11 estates.
Over 850 claims with a face amount of nearly $2.5 billion have been
filed in these cases, including approximately $355 million in unsecured claims
and approximately $2.2 billion in secured claims. Many of these claims are
duplicate claims filed by the same creditors in each of the three cases. The
Debtors scheduled liabilities of approximately $1.18 billion. The Debtors have
devoted substantial effort to reducing the total amount of allowed claims. In
connection with an extensive claims analysis they have: (a) established a
detailed database; (b) prepared objections to claims; and (c) undertaken
extensive negotiations with creditors regarding reduction or withdrawal of
claims.
These efforts have resulted in the disallowance, withdrawal, agreement
to withdraw or other resolution of approximately $1.25 billion in claims to
date. This process has led to the resolution of almost all employee, real and
personal property lease rejection, broker and borrower claims. Except as set
forth below, CMI anticipates only a few remaining claims disputes in these
areas.
Three large disputed claims remain unresolved: (a) the claim of Andrew
N. Friedman on behalf of a class of shareholders in the amount of $100 million
("Claim Number 330"); (2) the claim of the Capital Corporation of America, LLC
for approximately $18 million (the "CCA Claim"); and (3) the claim of GP
Properties Group, Inc., for approximately $882,000 (the "GP Properties Claim").
The Debtors believe they have substantial defenses to each of the disputed
claims and that the ultimate allowed amount of these claims, if any, will be
insignificant, although there can be no assurance of the outcome.
Claim Number 330 relates to shareholder litigation against CMI's
officers and directors. On March 20, 2000, CMI moved to withdraw reference of
the litigation relating to Claim Number 330 to the United States District Court
for the District of Maryland, and on March 30, 2000, CMI filed an objection to
Claim Number 330. On April 27, 2000, the District Court withdrew the reference
of the contested matter relating to Claim Number 330, and on July 19, 2000, the
District Court entered a consent order disallowing Claim Number 330 with
prejudice. The shareholder litigation was dismissed on March 30, 2000 by the
District Court. See "GENERAL INFORMATION - Legal Proceedings - Shareholder
Litigation" for background information related to the shareholder litigation.
The dismissal of the shareholder litigation was appealed by the plaintiffs on
May 1, 2000. On July 10, 2000, the United States Court of Appeals for the Fourth
Circuit dismissed the appeal by agreement of the parties.
The CCA Claim relates to an August 14, 1998 letter of intent between
CMI and CCA for the purchase of subordinated CMBS. The letter of intent included
financing and due diligence contingencies. CMI's position is that neither of
these contingencies was fulfilled. After preliminary due diligence, CMI
expressed concern regarding the quality of the mortgage loans underlying the
CMBS. CMI's further due diligence confirmed this preliminary view, and CMI
exercised its right not to go forward with the purchase because of its due
diligence concerns. CCA refused to withdraw its claim, and on August 31, 1999,
CMI filed an objection to the CCA Claim. The CCA Claim was filed for an amount
in excess of $17 million on February 11, 1999. On October 9, 1999, CCA responded
to the objection. By letter dated January 7, 2000, CCA indicated that the amount
of its claim was $18.8 million. The matter is now pending before the Bankruptcy
Court. On March 27, 2000, CCA filed a motion with the Bankruptcy Court revising
the amount of its claim to $18.2 million. Litigation is continuing with respect
to the CCA claims and CMI's objection thereto.
The GP Properties Claim relates to CMI's loan origination program. In
August and September 1998, CMI and GP Properties were involved in the
preliminary loan application process. These preliminary steps did not give rise
to a loan commitment. On October 7, 1998, GP Properties advised CMI that it
closed on alternative lending. GP Properties refused CMI's request that it
withdraw its claim, and on October 26, 1999, CMI objected to the GP Properties
Claim. GP Properties did not respond to the objection on or prior to the
objection deadline. On May 9, 2000, the Bankruptcy Court entered an order
disallowing and expunging the GP Properties Claim.
26
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The Debtors have been asked by the Unsecured Creditors' Committee to
make reference to the Objection filed by the Unsecured Creditors' Committee to
the $10 million proof of claim filed by the CMM Creditors' Committee against
CMI. The CMM Creditors' Committee is vigorously defending the objection. The
Debtors believe that if the Plan is confirmed including the treatment of the CMM
creditors in Class B5 as provided therein, the claim filed by the CMM Creditors'
Committee and the objection thereto filed by the Unsecured Creditors' Committee
will thereby be resolved.
The Debtors estimate the principal amount of allowed unsecured claims
will be approximately $195 million and allowed secured claims will be
approximately $760 million, subject to agreed sales of certain collateral.
APPOINTMENT OF SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF CMI
In May 1999, a Special Reorganization Committee of the Board of
Directors of CMI (the "Committee") was established to evaluate proposals
received from major financial institutions for private equity investments that
would be part of a plan of reorganization. The Committee, composed of the
Company's four outside directors, was also assigned the responsibility of
overseeing the ongoing development of the entire plan of reorganization under
which the Company could emerge from Chapter 11. Robert E. Woods was appointed
Lead Director of the Committee. Mr. Woods is Managing Director and head of loan
syndications for the Americas at Societe Generale. Prior to that, he was
Managing Director and head of the Real Estate Capital Markets and
Mortgage-Backed Securities Division of Citicorp.
PAYMENT OF NON-CASH DIVIDEND TO COMMON SHAREHOLDERS
On September 14, 1999, the Company declared a dividend to common
shareholders of approximately 1.61 million shares of a new series of junior
preferred stock (the "junior preferred stock" or "Series F Preferred Stock")
with a face value of $10 per share. The Company paid the junior preferred stock
dividend on November 5, 1999. Dividends are payable, in cash, when and if
declared, at a rate of 12% per annum, with the first dividend payable no earlier
than the end of the calendar quarter in which the Plan becomes effective, and
thereafter not more than quarterly, as determined by the Board of Directors of
CMI (the "Board of Directors" or "Board"). See "PLAN OF REORGANIZATION" and
Exhibit C (Series F Preferred Stock Articles) to Exhibit E to this Disclosure
Statement regarding amended dividend treatment contemplated by the Plan. See
"BUSINESS -- Effect of Chapter 11 Filing on REIT Status and Other Tax Matters --
The Company's 1998 Taxable Income."
EXCHANGE OF SERIES D PREFERRED STOCK FOR SERIES E PREFERRED STOCK
Prior to July 31, 2000, it is anticipated that 100,000 shares of Series
D Preferred Stock (representing all outstanding shares of Series D Preferred
Stock) will be exchanged for 100,000 shares of Series E Preferred Stock. The
principal purpose of such exchange will be to effect an extension of the July
31, 2000 mandatory conversion date, upon which the Series D Preferred Stock will
convert into common stock. The relative rights and preferences of the Series E
Preferred Stock differ from those of the Series D Preferred Stock in certain
material respects relating primarily to dividend and conversion matters. See
Exhibit B (Series E Preferred Stock Articles) to Exhibit E to this Disclosure
Statement.
EMPLOYMENT AGREEMENT EXTENSIONS
The Company's employment agreements with Messrs. Dockser and Willoughby
expired on June 30, 2000. Subject to Bankruptcy Court approval, the Company
approved an extension of such employment agreements until the earlier of the
Effective Date of the Plan or February 1, 2001, with such extensions to be
effective as of June 29, 2000. A motion seeking Bankruptcy Court approval of the
foregoing was filed with the Court on July 11, 2000, and the Court by order
entered on July 18, 2000 granted the motion.
27
<PAGE>
commencement or continuation of judicial, administrative or other actions or
proceedings against the Debtors that were or could have been commenced prior to
the commencement of the Chapter 11 Cases; (ii) the enforcement against the
Debtors or their property of any judgments obtained prior to the commencement of
the Chapter 11 Cases; (iii) the taking of any action to obtain possession of
property of the Debtors or to exercise control over such property; (iv) the
creation, perfection or enforcement of any lien against the property of the
bankruptcy estates of the Debtors; (v) any act to create, perfect or enforce
against the property of the Debtors any lien that secures a claim that arose
prior to the commencement of the Chapter 11 Cases; (vi) the taking of any action
to collect, assess or recover claims against the Debtors that arose before the
commencement of the Chapter 11 Cases; (vii) the set-off of any debt owing to the
Debtors that arose prior to the commencement of the Chapter 11 Cases against any
claim against the Debtors; or (viii) the commencement or continuation of a
proceeding before the United States Tax Court concerning the Debtors. Any entity
may apply to the Bankruptcy Court, upon appropriate showing of cause, for relief
from the automatic stay.
As noted above, the Debtors are authorized to manage their respective
properties and operate their respective businesses pursuant to the Bankruptcy
Code. During the course of the Chapter 11 Cases, the Debtors will be subject to
the jurisdiction and supervision of the Bankruptcy Court. The United States
Trustee has appointed (i) the Unsecured Creditors' Committee, (ii) the CMM
Creditors' Committee and (iii) the CMI Equity Committee (collectively, the
"Committees"). The Committees are expected to participate in the formulation of
the plans of reorganization for the respective Debtors. The Debtors are required
to pay certain expenses of the Committees, including professional fees, to the
extent allowed by the Bankruptcy Court.
Under the Bankruptcy Code, for 120 days following the Petition Date,
only the debtor-in-possession has the right to propose and file a plan of
reorganization with the Bankruptcy Court. If a debtor-in-possession files a plan
of reorganization during this exclusivity period, no other party may file a plan
of reorganization until 180 days following the Petition Date, during which
period the debtor-in-possession has the exclusive right to solicit acceptances
of the plan. If a debtor-in-possession fails to file a plan during the
exclusivity period or such additional exclusivity period as may be ordered by
the Bankruptcy Court or, after such plan has been filed, fails to obtain
acceptance of such plan from impaired classes of creditors and equity security
holders during the exclusive solicitation period, any party in interest,
including a creditors' committee, an equity security holders' committee, a
creditor or an equity security holder may file a plan of reorganization for such
debtor. Additionally, if the Bankruptcy Court were to appoint a trustee, the
exclusivity period, if not previously terminated, would terminate.
The Debtors' initial exclusivity period to file a plan of
reorganization ended on February 2, 1999. The Bankruptcy Court extended this
period through August 2, 1999 and again through September 10, 1999. The Debtors
sought a third extension of exclusivity through November 10, 1999 and on
September 20, 1999, the Bankruptcy Court entered an order (i) extending the
Debtors' right to file a plan of reorganization through October 16, 1999, (ii)
providing the Unsecured Creditors' Committee and the CMI Equity Committee the
right to jointly file a plan of reorganization through October 16, 1999 and
(iii) providing that any party in interest may file a plan of reorganization
after October 16, 1999. The Debtors filed (i) a Joint Plan of Reorganization on
September 22, 1999, (ii) an Amended Joint Plan of Reorganization and proposed
Joint Disclosure Statement on December 23, 1999, (iii) a Second Amended Joint
Plan of Reorganization and proposed Amended Joint Disclosure Statement on March
31, 2000, and (iv) a Third Amended Joint Plan of Reorganization and proposed
Second Amended Joint Disclosure Statement with respect thereto on April 25,
2000, with amendments thereto filed on July 13, 14 and 21, 2000. As noted above,
the Debtors' Third Amended Joint Plan of Reorganization is fully supported by
the CMI Equity Committee, which is a co-proponent of the Plan.
On December 20, 1999, the Unsecured Creditors' Committee filed its own
plan of reorganization and proposed disclosure statement with the Bankruptcy
Court. On January 11, 2000 and February 11, 2000, the Unsecured Creditors'
Committee filed its first and second amended plan of reorganization,
respectively, with the Bankruptcy Court and its amended proposed disclosure
statements with respect thereto. However, as a result of the successful
negotiations of the treatment of the unsecured creditors of CMI in Classes A9
and A10 as set forth in Exhibit 2 to the Plan, the Unsecured Creditors'
Committee is now supporting confirmation of the Debtors' Plan and has asked the
Bankruptcy Court to defer consideration of its plan pending approval of the
Debtors' Plan and the completion of mutually acceptable final documentation.
Accordingly, the Debtors, the CMI Equity Committee and the Unsecured Creditors'
Committee are together presenting the Debtors' Plan for approval by all Holders
of Claims and Interests in Impaired Classes.
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The Company's post-bankruptcy business strategy is designed to
capitalize on its core strengths in real estate and mortgage finance. The key
components of the Company's business strategy are initially, upon emergence from
Chapter 11, the continued ownership and management of the Company's remaining
portfolio of mortgage-related assets, the continuation and, as appropriate,
expansion of its servicing business, the reduction of outstanding indebtedness
consistent with the terms agreed to with Merrill and GACC and the Unsecured
Creditors' Committee as set forth in the Plan, and to invest and trade in CMBS
and other mortgage-related assets. See "CERTAIN RISK FACTORS -- Risks Associated
With Trader Election." At such time as market conditions permit and provided
that the Company is able to access external capital (if and as necessary)
through the capital markets on terms acceptable to the Company (with the use of
such capital to be subject to and consistent with the terms agreed to with
Merrill and GACC and the Unsecured Creditors' Committee, as set forth in the
Plan), the Company intends to resume the acquisition of Subordinated CMBS and
the origination and securitization of commercial mortgage loans. See "PLAN OF
REORGANIZATION -- The Reorganized Debtors -- Business of Reorganized Debtors"
and "CERTAIN RISK FACTORS."
MANAGEMENT OF EXISTING PORTFOLIO AND CONTINUATION OF SERVICING
BUSINESS. The Company will continue to own and manage, through its servicing
affiliate CMSLP, a large portfolio of mortgage-related assets. On a proforma
basis, giving effect to the reorganization, including the assumed sale of $702
million (face amount) of CMBS, the Company's September 30, 2000 GAAP balance
sheet would include approximately $2.0 billion (face amount) of CMBS and
insured mortgage securities that were securitized by the Company. The Company
will continue to actively monitor and manage the credit risks and performance of
its portfolio in an effort to maximize returns.
Following the reorganization and rating agency approval, the Company
expects to exercise its right, as owner of the controlling bond class, to
re-name CMSLP as special servicer for transactions in its portfolio currently
being specially-serviced by ORIX with CMSLP serving as their special
sub-servicer. In addition, the Company intends for CMSLP to pursue direct,
master and special servicing assignments, as well as expand its fee-based
services for a variety of participants in the mortgage and asset finance arenas.
ACCESS TO CAPITAL. The Company intends to internally generate capital
from operating and investing activities and expected reductions in REIT
distribution requirements to shareholders due to expected net operating losses
for tax purposes. Such capital will be used (subject to and consistent with the
terms agreed to with Merrill and GACC and the Unsecured Creditors' Committee) in
order to fund the initial key components of its business plan referenced above.
In order to fund the resumption of CMBS acquisitions and loan
originations and securitizations, discussed in more detail below, the business
plan contemplates that the Company will be required to access the capital
markets (with the use of such capital to be subject to and consistent with the
terms agreed to with Merrill and GACC and the Unsecured Creditors' Committee, as
set forth in the Plan) through public or private issuances of equity and/or debt
securities and/or through secured or unsecured credit facilities. In addition,
it is contemplated that the Company would continue to use long-term, fixed rate
debt refinancings, short-term borrowing agreements (but to a lesser extent than
utilized prior to the Chapter 11 filing and in accordance with the terms agreed
to with Merrill and GACC and the Unsecured Creditors' Committee) and other
borrowings to fund a portion of any mortgage asset acquisitions.
RESUMPTION OF SUBORDINATED CMBS ACQUISITIONS. Prior to the Chapter 11
filing, the Company had historically been a leading purchaser of Subordinated
CMBS. The Company believes that its servicing and underwriting capabilities are
competitive advantages that allow the Company to compete against other investors
who may have greater access to capital (or the ability to obtain capital at a
lower cost) for the acquisition of Subordinated CMBS. The Company's ability to
resume the acquisition of Subordinated CMBS will depend upon, among other
matters, market conditions and the Company's ability to access capital to fund
such acquisitions. The Company has not at this time arranged for any
post-reorganization financing for the acquisition of Subordinated CMBS and there
can be no assurance that the Company will be able to obtain any such acquisition
financing or that if acquisition financing is available it will be on favorable
terms.
RESUMPTION OF LOAN ORIGINATIONS AND SECURITIZATIONS. The Company's
ability to resume mortgage loan originations, principally through mortgage
loan conduit programs with major financial institutions for the primary
purpose of pooling such loans for securitization, will depend upon, among
other matters, market conditions, the
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Class C7 - Interests in Holdings Class C7 consists of all Allowed Interests
in Holdings of CMI and CMSLP.
Except for Disputed Claims, distributions will be made on the Effective
Date or as soon as practicable thereafter. See "PLAN OF REORGANIZATION --
Distributions Under the Plan" for a discussion of Plan provisions that may
affect the timing of distributions under the Plan. Distributions on account of
Claims that become Allowed Claims after the Effective Date will be made pursuant
to Section VI.B of the Plan (relating to timing and calculation of amounts to be
distributed under the Plan) and Section VI.H of the Plan (relating to
distributions on account of Disputed Claims once they are allowed). See "PLAN OF
REORGANIZATION -- Distributions Under the Plan -- Timing and Methods of
Distribution."
The treatment of Claims and Interests described below is subject to the
Plan provisions described in Section IV of the Plan.
B. TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN
DESCRIPTION OF CLAIMS AND INTERESTS
ADMINISTRATIVE CLAIMS. Subject to certain additional requirements for
professionals and certain other entities, each Holder of an Allowed
Administrative Claim will receive on account of its Administrative Claim and in
full satisfaction thereof, Cash equal to the amount of such Allowed
Administrative Claim on, as soon as practicable after, the later of the
Effective Date and the day on which such Claim becomes an Allowed Claim, unless
the Holder and the Debtors or the Reorganized Debtors agree or will have agreed
to other treatment of such Claim, or an order of the Bankruptcy Court provides
for other terms; provided, that if incurred in the ordinary course of business
or otherwise assumed by the Debtors pursuant to the Plan (including
Administrative Claims of governmental units for taxes), an Allowed
Administrative Claim will be assumed on the Effective Date and paid, performed
or settled by the Reorganized Company when due in accordance with the terms and
conditions of the particular agreement(s) governing the obligation in the
absence of the Reorganization Cases. In addition, on or before the Effective
Date, all fees payable pursuant to 28 U.S.C. Section 1930, as determined by the
Bankruptcy Court at the Confirmation Hearing, will be paid in Cash equal to the
amount of such Administrative Claim.
PRIORITY TAX CLAIMS. Unless otherwise agreed to by the Debtors or the
Reorganized Debtors and the Holder of a Priority Tax Claim, each Holder of an
Allowed Priority Tax Claim will receive, at the sole option of the Reorganized
Debtors (i) Cash equal to the unpaid portion of such Allowed Priority Tax Claim
on the later of the Effective Date and the date on which such Claim becomes an
Allowed Priority Tax Claim, or as soon thereafter as is practicable, or (ii)
equal quarterly Cash payments in an aggregate amount equal to such Allowed
Priority Tax Claim, together with interest at a fixed annual rate to be
determined by the Bankruptcy Court or otherwise agreed to by the Reorganized
Debtors and such Holder, over a period through the sixth anniversary of the date
of assessment of such Allowed Priority Tax Claim, or upon such other terms
determined by the Bankruptcy Court to provide the Holder of such Allowed
Priority Tax Claim deferred cash payments having a value, as of the Effective
Date, equal to such Allowed Priority Tax Claim.
The Debtors are not currently in a position to determine the amount of
Administrative Claims, Priority Tax Claims and other Priority Claims for which
they will be liable as of the Effective Date. However, solely for purposes of
preparing the projections set forth in Exhibit B hereto and estimating
recoveries for creditors under the Plan, they have estimated that the aggregate
amount of such Claims may approximate up to $15 million.
TREATMENT OF CLAIMS AGAINST AND INTERESTS IN CMI
1. Class A1 (Citicorp Secured Claims).
The Holder of the Allowed Class A1 Claim will receive on the Effective
Date
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the treatment of its Allowed Secured Claim set forth on Exhibit 4 to the Plan,
or such other treatment as may be agreed to by CMI and the Holder of the Allowed
Class A1 Claim. As set forth in Exhibit 4, the treatment set forth therein
resolves all Claims of Salomon Smith Barney Inc.,
Citicorp Real Estate, Inc., Citicorp Securities, Inc. and Citicorp
North America, Inc. against each of the Debtors, the Reorganized Debtors and
CRIIMI MAE Brick Church, Inc.
The Debtors expect that there will be $0 of Allowed Class A1 Claims
against the Debtors as of the Effective Date after giving effect to the
reorganization provisions of the Plan including payments to be made on the
Effective Date.
2. Class A2 (First Union Secured Claim).
The Holder of the Allowed Class A2 Claim will receive on the Effective
Date payment in full in Cash of any remaining balance of the Allowed Class A2
Claim with interest on the principal balance of such Allowed Claim calculated at
the Plan Rate.
The Debtors expect that there will be less than $240,000 of Allowed
Class A2 Claims against the Debtors as of the Effective Date after giving effect
to the reorganization provisions of the Plan including payments to be made on
the Effective Date.
3. Class A3 (GACC Secured Claim).
The Holder of the Allowed Class A3 Claim will receive on the Effective
Date the treatment of its Allowed Secured Claim set forth on Exhibit 1 to the
Plan, or such other treatment as may be agreed to by CMI and the Holder.
The Debtors expect that there will be approximately $87 million of
Allowed Class A3 Claims against the Debtors as of the Effective Date after
giving effect to the reorganization provisions of the Plan including payments to
be made on the Effective Date.
4. Class A4 (Lehman Secured Claim).
The Holder of the Allowed Class A4 Claim will receive on the Effective
Date payment in full in Cash of any remaining balance of the Allowed Class A4
Claim with interest on the principal balance of such Allowed Claim calculated at
the Plan Rate.
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The Debtors expect that there will be $ 0 of Allowed Class A11 Claims
against the Debtors as of the Effective Date.
12. Class A12 (Freddie Mac Claims).
CMI's obligation under the Freddie Mac Agreement shall be deemed
reaffirmed on the Effective Date, and the Claims of Freddie Mac numbered 335 and
497 on the July 2, 1999 claims register, each in the amount of $230,448,487.24,
shall be deemed withdrawn and thereby disallowed as of the Effective Date.
The Debtors expect that there will be $ 0 of Allowed Class A12 Claims
against the Debtors as of the Effective Date.
13. Class A13 (Intercompany Claims).
Holders of Allowed Class A13 Claims will not receive any payment under
the Plan on account of such Claims.
14. Class A14 (Series B Preferred Stock).
Each Holder of Series B Preferred Stock as of the Effective Date will
retain its Series B Preferred Stock; provided that if the Holders of Series B
Preferred Stock as of the Voting Record Date vote as a Class by the requisite
amount to accept the Plan, the Articles Supplementary relating to the Series B
Preferred Stock will be deemed amended (and, as amended, to be part of the
Reorganized CMI Amended and Restated Articles of Incorporation) to permit the
payment of dividends on Series B Preferred Stock, including accrued and unpaid
dividends, in CMI Common Stock or Cash (or a combination thereof), at the
election of Reorganized CMI, with such payment of dividends to be consistent
with Exhibits 1 and 2 to the Plan. It is contemplated that such dividends will
be paid in CMI Common Stock. See Exhibit 2 to the Plan regarding limitations on
cash dividends. Holders of Series B Preferred Stock who are not affiliates or
"underwriters" may publicly trade the CMI Common Stock issued to them on the
Effective Date as payment for dividends accrued and payable.
The Debtors expect that there will be approximately $39.9 million of
Allowed Class A14 Interests in the Debtors as of the Effective Date after giving
effect to the reorganization provisions of the Plan (assuming that the accrued
and unpaid dividends are paid in CMI Common Stock).
15. Class A15 (Series B Preferred Stock Securities Claims).
Each Holder (if any) of an Allowed Class A15 Claim will, if, as and
when any such Claim is Allowed by Final Order, receive in full satisfaction of
any such Allowed Class A15 Claim its share of any Insurance Proceeds applicable
thereto plus, if such Allowed Class A15 Claim (if any) is not paid in full from
such Insurance Proceeds, CMI Common Stock in an amount equal in value, as of the
date of issuance thereof, to the balance (if any) of such Allowed Class A15
Claim, provided that any such Claim not timely filed (and in any event not filed
before the Confirmation Date) shall be released and discharged under the Plan
and Confirmation Order.
The Debtors expect that there will be $ 0 of Allowed Class A15 Claims
against the Debtors as of the Effective Date.
16. Class A16 (Former Series C Preferred Stock).
Former Series C Preferred Stock has been exchanged for Series E
Preferred Stock. Each Holder of Series E Preferred Stock as of the Distribution
Record Date shall retain its Series E Preferred Stock and such Series E
Preferred Stock shall have the terms, rights and preferences summarized in
Exhibit 3 to the Plan and as set forth in the Articles Supplementary relating to
the Series E Preferred Stock, as such Articles Supplementary shall be amended as
of the Effective Date, expected to be substantially in the form of Exhibit B
(Series E Preferred Stock Articles) to Exhibit E (Reorganized CMI Amended and
Restated Articles of Incorporation) to the Disclosure Statement. All accrued and
past due dividends from February 23, 2000 through the Effective Date on Series E
Preferred Stock will be paid on the Effective Date in CMI Common Stock. All
other accrued and past due dividends on Former Series C Preferred Stock (prior
to February 23, 2000) shall be paid on the Effective Date in CMI
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Restated Articles of Incorporation) to permit the payment of dividends on Series
F Dividend Preferred Stock, including any accrued and unpaid dividends, in CMI
Common Stock or Cash (or a combination thereof), at the election of Reorganized
CMI, with such payment of dividends to be consistent with Exhibits 1 and 2 to
the Plan. It is possible that such dividends may be paid in CMI Common Stock.
See Exhibit 2 to the Plan regarding limitations on cash dividends. Holders of
Series F Dividend Preferred Stock who are not affiliates or "underwriters" may
publicly trade the CMI Common Stock issued to them on the Effective
Date as payment for dividends accrued and payable.
The Debtors expect that there will be approximately $6.5
million of Allowed Class A20 Interests in the Debtors as of the Effective Date
after giving effect to the reorganization provisions of the Plan (assuming that
the accrued and unpaid dividends are paid in CMI Common Stock).
21. Class A21 (CMI Common Stock).
Each Holder of an Allowed Class A21 Interest as of the Effective Date
will retain its CMI Common Stock.
22. Class A22 (Stock Options).
Each Holder of a Stock Option as of the Effective Date will retain its
Stock Option.
23. Class A23 (CMI Common Stock Securities Claims).
All Holders (if any) of Allowed Class A23 Claims will receive in full
satisfaction of any such Allowed Class A23 Claims their share of any Insurance
Proceeds applicable thereto plus, if such Allowed Class A23 Claims (if any) are
not paid in full from such Insurance Proceeds, CMI Common Stock in an amount
equal in value, as of the date of issuance thereof, to the balance (if any) of
such Allowed Class A23 Claims.
The Debtors expect that there will be $ 0 of Allowed Class A23 Claims
against the Debtors as of the Effective Date.
TREATMENT OF CLAIMS AGAINST AND INTERESTS IN CMM
1. Class B1 (First Union Secured Claims).
The Holder of the Allowed Class B1 Claim will receive on the Effective
Date payment in full in Cash of any remaining balance of the Allowed Class B1
Claims with interest on the principal balance of such Allowed Claim calculated
at the Plan Rate.
The Debtors expect that there will be $ 0 of Allowed Class B1 Claims
against the Debtors as of the Effective Date after giving effect to the
reorganization provisions of the Plan including payments to be made on the
Effective Date.
2. Class B2 (Other Secured Claims).
Each Holder (if any) of an Allowed Class B2 Claim will receive on the
Effective Date either (i) payment in full in Cash of the Allowed Class B2 Claims
with interest on the principal balance of any such Allowed Claim calculated at
the Plan Rate; (ii) if CMM so elects, the collateral securing the Allowed Class
B2 Claims (if any) in full satisfaction of such Claims; or (iii) such other
treatment as may be agreed to by CMM and the Holder(s) (if any) of Allowed Class
B2 Claims.
The Debtors expect that there will be $ 0 of Allowed Class B2 Claims
against the Debtors as of the Effective Date.
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3. Class B3 (Priority Claims).
Each Holder of an Allowed Class B3 Claim will receive on the Effective
Date payment in full in Cash of the Allowed Class B3 Claims including Plan
Interest thereon.
The Debtors expect that there will be $ 0 of Allowed Class B3 Claims
against the Debtors as of the Effective Date after giving effect to the
reorganization provisions of the Plan including payments to be made on the
Effective Date.
4. Class B4 (Guarantee Claims).
Each Holder (if any) of an Allowed Class B4 Claim shall be paid, if, as
and when any such Claim is allowed by Final Order, in Cash in full by CMM or
Reorganized CMM including Plan Interest thereon if, and only to the extent not
fully treated with respect to such Holder's underlying Allowed Claim under the
Plan treatment for Claims against CMI or Holdings, as the case may be.
The Debtors expect that there will be $ 0 of Allowed Class B4 Claims
against the Debtors as of the Effective Date.
5. Class B5 (CMM General Unsecured Claims).
Each Holder of an Allowed Class B5 Claim will receive on the Effective
Date payment in full in Cash of Allowed Class B5 Claims, with accrued and unpaid
pre-petition and post-petition interest thereon calculated at the non-default
contract rate of interest in such Holder's documents for those Holders of
Allowed Class B5 Claims who have a contract, the invoice rate (capped at 9-1/8%)
for those Holders of Allowed Class B5 Claims who have an invoice rate, and 6%
for all other Holders of Allowed Class B5 Claims.
The Debtors expect that there will be $ 0 of Allowed Class B5 Claims
against the Debtors as of the Effective Date after giving effect to the
reorganization provisions of the Plan including payments to be made on the
Effective Date.
6. Class B6 (Intercompany Claims).
Holders of Class B6 Claims will not receive any payment under the Plan
on account of such Claims.
7. Class B7 (CMI's Interests in CMM).
The Holder will retain its Interest under the Plan.
TREATMENT OF CLAIMS AGAINST AND INTERESTS IN HOLDINGS
1. Class C1 (Citicorp Secured Claims).
Each Holder (if any) of any remaining Allowed Class C1 Claim (if any)
shall be included in and satisfied as part of the treatment of the Holder of the
Allowed Class A1 Claim as set forth on Exhibit 4 to the Plan.
The Debtors expect that there will be $ 0 of Allowed Class C1 Claims
against the Debtors as of the Effective Date.
2. Class C2 (Other Secured Claims).
Each Holder (if any) of an Allowed Class C2 Claim will receive on the
Effective Date either (i) payment in full in Cash of the Allowed Class C2 Claim
with interest on the principal balance of any such Allowed Claim calculated at
the Plan Rate; (ii) if Holdings so elects, the collateral securing the Allowed
Class C2 Claim (if any) in full satisfaction of such Claim; or (iii) such other
treatment as may be agreed to by Holdings and the Holder(s) (if any) of Allowed
Class C2 Claim(s).
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issuance of non-voting equity securities and then such Articles of Incorporation
and Bylaws shall be amended and filed with the Maryland Department of
Assessments and Taxation on the Effective Date.
SECOND AMENDED AND RESTATED OPTION PLAN FOR KEY EMPLOYEES. On or prior
to the Effective Date, the Second Amended and Restated Stock Option Plan for Key
Employees (the "Second Amended Employee Stock Option Plan"), substantially in
the form of Exhibit G hereto and incorporated herein by reference, will be
adopted by the Board of Directors to be effective on the Effective Date and, by
voting to accept the Plan, all Holders of Class A21 Interests shall be deemed to
have ratified and approved the Second Amended Employee Stock Option Plan.
Additionally, upon entry of the Confirmation Order, the Second Amended Employee
Stock Option Plan shall be deemed an exhibit to and part of the Plan and the
Bankruptcy Court shall, consistent with Maryland and federal law, be deemed to
have approved the Second Amended Employee Stock Option Plan (including the
increase in the number of shares of common stock with respect to which options
may be granted and an extension of time in which options may be granted, as
provided for therein) on behalf of CMI's stockholders and in satisfaction of
Section 422 of the Internal Revenue Code. Following the Effective Date, the
Board of Directors of Reorganized CMI may further amend or modify the Second
Amended Employee Stock Option Plan in accordance with the terms thereof and any
such further amendment or modification shall not require amendment of the Plan.
The Second Amended Employee Stock Option Plan amends CMI's Amended and Restated
Stock Option Plan for Key Employees to, among other matters, provide for an
increase in the number of shares of CMI Common Stock with respect to which
options may be granted from 2,068,031 (as adjusted from 2 million shares as a
result of the junior preferred stock dividend paid to common stockholders in
November 1999 and consistent with a Bankruptcy Court Order which limits the full
adjustment to 2,198,831 shares, contemplated by the terms and provisions of the
Second Amended Employee Stock Option Plan, until CMI emerges from Chapter 11) to
4,500,000; to extend the time in which options may be granted under the Plan
from June 30, 2000 until June 30, 2002; and to effect changes consistent with
current securities and tax laws. After the Effective Date it is expected that
common stockholder approval of the material terms of the Second Amended Employee
Stock Option Plan will be sought for purposes of becoming exempt from the
deduction limits set forth in Section 162(m) of the Internal Revenue Code. See
"GENERAL INFORMATION - Management" for a description of the Amended and Restated
Stock Option Plan for Key Employees to be amended by the Second Amended Employee
Stock Option Plan.
CMI's Non-Employee Director Stock Option Plan in place prior to the
Effective Date shall remain in place after the Effective Date and Reorganized
CMI shall continue to honor such option plan.
E. RECAPITALIZATION FINANCING INCLUDING ISSUANCE OF NEW SECURITIES
On the Effective Date, the Recapitalization Financing shall be funded
and become effective and the CMBS Sale Portfolio, if not already sold, shall be
sold as parts of effectuating consummation of the Plan. On the Effective Date,
Reorganized CMI will issue the New Securities in accordance with the Plan. The
Plan provides that the issuance of the New Securities, and all securities
issuable upon conversion of the New Securities, is thereby authorized pursuant
to Section 1145 of the Bankruptcy Code, without further action under applicable
law. In addition, on the Effective Date, the Reorganized Debtors will implement
and, to the extent applicable, receive the proceeds of the New Debt in
accordance with the terms of the applicable documents with respect thereto. On
the Effective Date all securities, instruments, corporate documents, and
agreements entered into pursuant to or contemplated by the Plan, including,
without limitation, the New Securities, any other security and any instrument,
corporate document, or agreement entered into in connection with any of the
transactions referenced in Section V or Section X.H of the Plan, shall become
effective, binding and enforceable in accordance with their respective terms and
conditions upon the parties thereon without further act or action under
applicable law, regulation, order or rule, and shall be deemed to become
effective simultaneously.
F. SALE OF THE CMBS SALE PORTFOLIO
On or before the Effective Date, the commercial
mortgage-backed securities and any other assets in the CMBS Sale Portfolio
(including the CMO-IV Sale) shall be sold in accordance with the terms of the
Plan and any Orders with respect thereto entered by the Bankruptcy Court. The
proceeds thereof shall be used to pay Allowed Secured Claims in accordance with
any Orders entered by the Bankruptcy Court with respect thereto and otherwise
used as part of the funding of the Plan.
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G. AFFILIATE REORGANIZATION
In order to secure certain financing contemplated under the Plan with
the commercial mortgage backed securities representing the equity interests in
CBO-1, and CBO-2(the "Equity Interests"), CMI anticipates that, as a part of the
Plan, either (i) a reorganization of certain CMI affiliated entities will be
effected resulting in REIT subsidiaries holding the Equity Interests or owning
the stock in the qualified REIT subsidiaries holding the Equity Interests, or
(ii) the qualified REIT subsidiaries holding the Equity Interests or the trusts
holding the underlying assets will elect REIT status (and other actions will be
taken as necessary to effect such election), with the intent to secure such
financing with a pledge of stock in the REITs, in lieu of a direct pledge of the
Equity Interests, which is restricted under certain operative and constituent
documents and could result in adverse tax consequences and a negative impact on
collateral values. This affiliate reorganization is designed to address concerns
of creditors who will provide financing under the Plan contemplated to be
secured by the Equity Interests. In addition, certain other action may be taken
as necessary to implement the foregoing. All of the actions taken in effecting
this affiliate reorganization shall be consistent with the provisions of Exhibit
2 to the Plan governing the treatment of Class A9 and Class A10.
H. POTENTIAL NEW EQUITY INVESTMENT AND RIGHTS OFFERING
Although not required to fund the Plan, the Debtors, in consultation
with the CMI Equity Committee, may seek new equity capital from one or more
investors to partially fund the Reorganized Debtors and the Plan as
Recapitalization Financing. In such event, the Plan will be amended to
appropriately reflect such new equity capital transaction, in a manner
consistent with Exhibits 1 and 2 to the Plan. If new equity capital is sought,
it is likely to take the form of a private issuance of preferred stock with such
relative rights and preferences as may be agreed to consistent with the terms of
the Plan.
In the event new equity capital is sought from an investor, it is also
anticipated that an offering of rights to purchase common stock or a new series
of preferred stock, with rights and preferences similar to the preferred stock
likely to be issued to the new equity capital investor but with limited voting
rights, would be made to Holders of CMI Common Stock. Such rights offering would
be developed in consultation with the CMI Equity Committee. Such rights offering
would commence on the Effective Date and would be for a percentage of the
aggregate face value of the securities issued to the new equity capital
investor. All or a portion of the proceeds of the rights offering may be used to
redeem at face value the securities issued to the new equity investor.
Even if CMI does not seek new equity from an investor, an offering of
rights to purchase CMI Common Stock may be made to Holders of CMI Common Stock
in connection with the Plan. Such rights offering would be developed in
consultation with the CMI Equity Committee.
In the event new equity capital is sought from an investor and a rights
offering is made to Holders of CMI Common Stock or a rights offering is made to
Holders of CMI Common Stock independent of any new equity investment by an
investor, the CMI Common Stock will be exchanged for new CMI Common Stock (on a
one share per one share basis) and rights (one right per share) structured to
ensure that the value of the CMI Common Stock exchanged exceeds the value of the
fresh capital raised in the rights offering, thereby making the exchange
principally in exchange for an interest and only partly for cash and rendering
applicable the limited transactional exemption from securities law registration
afforded by Section 1145 of the Bankruptcy Code. If CMI determines to proceed
with a rights offering, it has committed to discuss the applicability of the
exemption afforded by Section 1145 of the Bankruptcy Code with the SEC. If a
rights offering is made and an exchange of CMI Common Stock, consistent with the
foregoing, is effected, then CMI's existing Series B Preferred Stock, Old Series
D Preferred Stock, Series E Preferred Stock and Stock Options would be exchanged
for new Series B Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock and Stock Options, as applicable.
APPLICABILITY OF FEDERAL AND OTHER SECURITIES LAWS
In reliance upon the exemption provided by Section 1145(a)(1)
of the Bankruptcy Code, the Debtors have not filed a registration statement
under the Securities Act or any state securities laws with respect to the New
Securities that will be offered pursuant to the Plan or any other securities
issuable upon conversion of the New Securities. Pursuant to the requirements of
the Trust Indenture Act of 1939 (the "TIA"), applications for
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SUBSTANTIAL INDEBTEDNESS; LEVERAGE
The Company is now highly leveraged and will continue to be highly
leveraged after giving effect to the reorganization. At December 31, 1999, the
Company had total consolidated indebtedness of $2.0 billion (of which $926
million was recourse debt to the Company (i.e., not match-funded)) and
stockholders' equity of $219 million. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business -- General" and the
Consolidated Financial Statements of the Company and the accompanying notes
thereto appearing elsewhere in this Disclosure Statement. After giving effect to
the reorganization, the Company's estimated pro forma aggregate indebtedness at
September 30, 2000 would total approximately $1.1 billion (of which
approximately $425 million would be recourse debt to the Company (i.e., not
match-funded) and stockholders' equity would be approximately $236 million.
See "BUSINESS PLAN" and "Exhibit B-Unaudited Pro Forma Consolidated Financial
Statements and Projected Financial Information."
The Company's management believes that, based on its projections (which
are based upon a number of assumptions), the Company will have sufficient cash
resources to pay interest and scheduled principal on its outstanding
indebtedness, after giving effect to the reorganization. See "Exhibit
B-Unaudited Pro Forma Consolidated Financial Statements and Projected Financial
Information." However, even if the reorganization is completed, the Company's
ability to meet its debt service obligations will depend on a number of factors,
including management's ability to maintain cash flow and to generate capital
internally from operating and investing activities and expected reductions in
REIT distribution requirements to shareholders due to expected net operating
losses for tax purposes, in each case consistent with the terms agreed to with
Merrill and GACC and the Unsecured Creditors' Committee as set forth in the
Plan. There can be no assurance that targeted levels of cash flow will actually
be achieved, that reductions in REIT distribution requirements will be realized,
or that, if required, new capital will be available to the Company. The
Company's ability to maintain or increase cash flow and access new capital with,
respect to the resumption of Subordinated CMBS acquisitions and commercial
mortgage loan originations and securitizations, will depend upon, among other
things, interest rates, prevailing economic conditions and other factors, many
of which are beyond the control of the Company.
The Company's high level of debt limits its ability to obtain
additional capital, reduces income available for distributions, restricts the
Company's ability to react quickly to changes in its business and makes the
Company more vulnerable to economic downturns. In addition, the agreements
governing the Reorganized Debtors' debt may impose significant operating and
financial restrictions on the Company. See "PLAN OF REORGANIZATION."
RISKS RELATING TO NECESSARY RECAPITALIZATION FINANCING
Consummation of the Plan is conditioned upon, among other matters, the
Company obtaining New Debt and completing the CMBS Sale. See "PLAN OF
REORGANIZATION." Although the Company has sold certain CMBS in connection with
the CMBS Sale, is engaged in negotiating additional commitments for the CMBS
Sale, and has agreed to terms with respect to substantially all of the New Debt,
there can be no assurance that the Company will complete the CMBS Sale or obtain
and satisfy all terms and conditions of the New Debt. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
Note 5 to the Notes to Consolidated Financial Statements for a discussion of
certain CMBS sold in February and April, 2000 constituting a portion of the CMBS
Sale.
RISKS RELATING TO THE PROJECTIONS
The management of the Company has prepared the projected financial information
contained in this Disclosure Statement relating to the Company (the
"Projections") in connection with the development of the Plan and in order to
present the anticipated effects of the Plan and the transactions contemplated
thereby. The Projections assume, among other matters, that the Plan and the
transactions contemplated thereby will be implemented in accordance with their
terms and represent management's best estimate of the results of the Company's
operations following the Effective Date. The assumptions and estimates
underlying such Projections are forward-looking and, as such, are inherently
uncertain and, although considered reasonable by management as of the date
hereof, are subject to significant business, economic and competitive risks and
uncertainties that could cause actual results to differ materially from those
projected, including, among others, (1) the uncertain ability of the Company to
generate sufficient funds internally to meet its working capital and debt
service requirements; (2) interest rate and financial
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CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on this 21ST day of July, 2000, copies
of the Praecipe Filing Further Substituted Pages to the Debtors' Second Amended
Joint Disclosure Statement were sent via first-class mail, postage prepaid
(except as otherwise indicated), to the persons on the attached service list.
/s/
-------------------------------
Richard L. Wasserman
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