EXECUTION COPY
SETTLEMENT AGREEMENT
This Settlement Agreement (hereinafter, the "Agreement") is made this 6th
day of February, 2002 between CRIIMI MAE Inc. ("CMM") and First Union National
Bank ("FUNB") in consideration of the mutual covenants contained herein and the
benefits derived herefrom:
RECITALS
WHEREAS, CMM is a self administered real estate investment trust organized
and existing under the laws of the State of Maryland with its principal place of
business at 00000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxxxxxxx;
WHEREAS, FUNB is a National Banking Association with offices at 000 Xxxxx
Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000;
WHEREAS, on October 5, 1998 (the "Petition Date"), CMM filed a voluntary
petition for relief pursuant to Chapter 11 of the Bankruptcy Code in the United
States Bankruptcy Court for the District of Maryland (the "Court");
WHEREAS, on Xxxxx 00, 0000, XXX filed its Third Amended Joint Plan of
Reorganization (the "Plan") and Second Amended Joint Disclosure Statement (the
"Disclosure Statement");
WHEREAS, prior to the Petition Date, FUNB extended credit (the "Loan") to
CMM pursuant to the following documents (collectively, the "Loan Documents"):
(i) that certain Credit Agreement dated as of December 31, 1996, executed by
CMM, Signet Bank, and Xxxxx Bank, N.A., and later agreed to and accepted by
FUNB, as amended (as so amended, the "Credit Agreement") and (ii) that certain
FUNB Replacement Note dated as of April 6, 1998, in the original principal
amount of $15,000,000.00 made by CMM in favor of FUNB (the "Replacement Note");
WHEREAS, on the Petition Date, CMM was (and remains) indebted to FUNB under
the Loan Documents in the principal amount of $15,000,000.00 plus accrued and
unpaid interest;
WHEREAS, as of April 17, 2001, the total amount of FUNB's claim, including
accrued and unpaid interest was $17,929,222.91 (the "Effective Date Claim
Amount");
WHEREAS, as of November 30, 2001, the total amount of accrued and unpaid
interest on the principal amount of the Replacement Note is $511,848.96,
accruing at the contract rate of one month LIBOR plus 175 basis points (such
rate of interest, the "Contract Interest");
WHEREAS, on the Petition Date, FUNB held the Safekeeping Securities (as
defined below) in a custodian account maintained by CMM at FUNB (the "Custodian
Account")
pursuant to that certain Custodian Agreement dated as of October 10,
1997, by and between CMM and FUNB (the "Custodian Agreement");
WHEREAS, CMM has disputed FUNB's right to assert a security interest in the
Safekeeping Securities (as defined below). Instead, CMM has identified FUNB in
the Plan as a general unsecured creditor holding a Class A10 Claim (as defined
in the Plan);
WHEREAS, on or about August 31, 2000, FUNB filed an adversary proceeding
under the Bankruptcy Code entitled First Union National Bank v. CRIIMI MAE Inc.,
Adv. Pro. No. 00-1471 (the "Adversary Proceeding") seeking a determination by
the Court of its secured status and a ruling by the Court on its exclusive
rights to the Safekeeping Securities (as defined below), together with the
proceeds thereof;
WHEREAS, in the Adversary Proceeding FUNB asserted that under the Custodian
Agreement, CMM granted FUNB a lien upon and security interest in (together with
all proceeds, including, without limitation, distributions and other amounts
realized in respect of any of the following), inter alia, the following (the
"Safekeeping Securities"): (i) the Xxxxxx Xxxxxxx Capital Series 1998-WF2 Class
N CUSIP No.: 61745MHLO security (the "Xxxxxx Xxxxxxx Class N Security"); (ii)
the Chase Comm. Mtg. Series 1998-1 Class J CUSIP No. 000000XX0 Security (the
"Chase Class J Security"); and (iii) the Nomura Asset Sec. Corp. Series 1998-D6
Class N CUSIP No. 000000XX0 security (the "Nomura Class N Security");
WHEREAS, in response to the Complaint filed by FUNB instituting the
Adversary Proceeding, CMM filed an Answer and Counterclaim (the "Answer")
seeking, inter alia, the dismissal of the Adversary Proceeding. Additionally, in
its Answer, CMM asserted a counterclaim against FUNB for damages arising from
FUNB's allegedly wrongful refusal to turn over the Safekeeping Securities (the
"Counterclaim");
WHEREAS, on August 5, 1999 and March 28, 2000, the Court entered
stipulations (the "First and Second Stipulations", respectively) between FUNB
and CMM authorizing the use of cash collateral. Pursuant to the First and Second
Stipulations, FUNB turned over the income from the Safekeeping Securities (e.g.
the proceeds, dividends, distributions and other income derived therefrom) (the
"Custodial Income") to CMM including all Custodial Income received between the
Petition Date and the entry of the First Stipulation on August 5, 1999 and all
Custodial Income received through March 31, 2000. CMM has deposited the
Custodial Income that it received into a segregated interest-bearing account.
Subsequent to the March 31, 2000 expiration of the Second Stipulation, FUNB has
continued to receive the Custodial Income;
WHEREAS, on February 24, 2000, the Court entered an order authorizing the
sale of the Xxxxxx Xxxxxxx Class N Security (the "Xxxxxx Xxxxxxx Sale") to
Xxxxxx Xxxxxxx & Co. International Limited. Pursuant to the February 24, 2000
order, CMM has deposited the net proceeds of the Xxxxxx Xxxxxxx Sale in a
segregated interest-bearing account, subject to a determination of FUNB's
alleged security interest in the proceeds of the Xxxxxx Xxxxxxx Sale;
WHEREAS, on August 3, 2000, the Court entered an order authorizing the sale
of the Chase Class J Securities (the "Chase Sale") to German American Capital
Corporation. Pursuant to the August 3, 2000 order, CMM has deposited the net
proceeds of the Chase Sale in a segregated interest-bearing account, subject to
a determination of FUNB's alleged security interest in the proceeds of the Chase
Sale;
WHEREAS, on March 28, 2001, the Court entered a stipulation and agreed
order pursuant to CMM's Motion to Substitute and Value Alleged Collateral in
connection with the Nomura Class B7 Securities (the "Nomura Substitution"), (a)
directing transfer of the Nomura Class B7 Security to CMM free and clear of
alleged liens and encumbrances, (b) valuing the Nomura Class B7 Security at $8.7
million, and (c) authorizing CMM to deposit the sum of $8.7 million in a
segregated interest-bearing account, subject to a determination of FUNB's
alleged security interest in the proceeds of the Nomura Substitution;
WHEREAS, on November 22, 2000, the Court executed an Order confirming the
Plan under 11 U.S.C. ss. 1129 (the "Confirmation Date"). Subsequent thereto, on
or about November 27, 2000, the Clerk of the Court entered the Confirmation
Order on the docket (the "Confirmation Order");
WHEREAS, on or about April 17, 2001 (the "Plan Effective Date"), CMM
satisfied all conditions to the Plan Effective Date set forth in the Plan;
WHEREAS, Paragraph 10 of Article IV (C) of the Plan provides that those
entities classified as holders of Allowed Class A10 Claims shall receive a
distribution on the Plan Effective Date, which includes a combination of cash, a
note payable over five (5) years at 11.75% interest (the "Series A Note") and a
note payable over six (6) years at 13% interest, plus 7% accreting interest (the
"Series B Note") (collectively the "Class A10 Notes") in an amount equal to the
allowed amount of the claim (the "Class A10 Distribution");
WHEREAS, CMM and FUNB deny any and all liability whatsoever to the other in
connection with the Adversary Proceeding;
WHEREAS, CMM and FUNB (referred to jointly as the "Parties"), for good and
valuable consideration and to avoid the costs associated with continuing to
litigate this matter, have agreed to resolve all of their claims, disputes and
obligations arising from the Loan Documents and the Custodian Agreement;
NOW, THEREFORE, in full and final settlement of all claims that the parties
have asserted or could have asserted in the Adversary Proceeding against the
other party, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree and covenant as follows:
1. Recitals. The foregoing recitals are true and correct and are
incorporated into this Agreement as if set forth in full herein.
2. Settlement Transactions. The Parties, as indicated, shall complete, or
cause third parties to complete, the transactions below in accordance with the
following terms and conditions:
a. On the Effective Date (as defined in Section 8 below), CMM shall cause
Xxxxx Fargo Bank Minnesota, N.A. ("Xxxxx Fargo"), as disbursing agent, to
release from escrow to FUNB the Series A Note having a face amount of
$7,517,630.54 as of November 30, 2001 and the Series B Notes having an aggregate
face amount of $4,809,273.10 (collectively, the "Notes"). The Notes will be sold
pursuant to the provisions of Section 3 below. FUNB shall, by the close of
business on the day (i.e. the trade date) that FUNB reaches an agreement with a
third party to sell the Notes, provide (1) written notice to CMM stating the
settlement date of the Notes (the "Settlement Date") and the agreed upon
purchase price for the Notes and (2) appropriate evidence of the proceeds (the
"Proceeds") expected to be realized from the sale of the Notes on the Settlement
Date, and (3) a breakdown of the Proceeds including the principal amount (which
aggregate amount for the Series B Notes may have increased because of the
semi-annual payment of interest in-kind on the principal amount of such Note at
the rate of 7% per annum), accrued interest, and commissions separately
identified provided such information is provided to FUNB by such third party.
b. On the Settlement Date, (1) FUNB shall release from escrow to CMM an
amount totaling $16,072,662.91 as of November 30, 2001, plus all interest
thereon through and including the Settlement Date; (2) CMM shall cause Xxxxx
Fargo, as disbursing agent, to release from escrow to (A) FUNB the escrow cash
amount of $5,382,894.66 (the "Escrow Cash Amount") and (B) CMM an amount
totaling $1,315,394.24 as of November 30, 2001, plus all cash interest and
principal payments on the Notes through and including the Settlement Date, plus
any remaining amounts held in escrow by Xxxxx Fargo after giving effect to
Section 2(b)(2)(A) above; and (3) CMM shall cause SunTrust Bank to release from
escrow to CMM an amount totaling $6,744,049.11 as of November 30, 2001, plus all
interest thereon through and including the Settlement Date.
c. On the Settlement Date, CMM will pay to FUNB an amount (the "Revised
Claim Amount") equal to the sum of the Effective Date Claim Amount and the
Contract Interest on the principal amount of the Replacement Note commencing on
the Plan Effective Date through and including the Settlement Date less (1) the
Proceeds, (2) any additional (A) cash interest actually paid on the Series A
Note, (B) principal paydowns actually received on the Series A Note and (C) any
other amounts actually received in connection with the Series A Note, other than
Proceeds, received by FUNB since the Effective Date, (3) any additional (A) cash
interest actually paid on the Series B Notes, (B) principal paydowns actually
received on the Series B Notes and (C) any other amounts actually received in
connection with the Series B Notes, other than Proceeds, received by FUNB since
the Effective Date, and (4) the Escrow Cash Amount; provided, however, that FUNB
shall not be entitled to receive any amounts in excess of its Revised Claim
Amount, and if the above formula results in FUNB receiving an amount greater
than its Revised Claim Amount (the "Excess Amount"), FUNB shall refund the
Excess Amount to CMM promptly, but no later than one business day after the
Settlement Date. Such payment from CMM to FUNB shall be in full satisfaction of
FUNB's claims arising from the Loan Documents and Custodian Agreement.
3. The Series A and B Notes. The Series A Note and the Series B Notes will
be sold (with consultation with CMM) in a commercially reasonable manner (as if
by a person who did not have the benefit of the protection provided in Section
2(c) above), through a nationally-recognized broker/dealer acceptable to CMM,
unless a higher net price can be obtained otherwise; provided, however, that if
any third party offers to purchase the Notes for an amount equal to or greater
than 97.5% of the face amount of the Series A Note and 87.5% of the aggregate
face amounts of the Series B Notes, FUNB shall sell the Notes to such party;
provided, further, that if FUNB does not use a nationally recognized
broker/dealer acceptable to CMM to sell the Notes, then no fees, commissions or
other costs associated with the sale of such Notes will be reimbursed by CMM to
FUNB through the mechanics of Section 2 above or otherwise.
4. Waiver of Attorneys Fees Claims. FUNB and CMM hereby waive any and all
claims for their attorney's fees.
5. Withdrawal of Claims. FUNB agrees to dismiss with prejudice the
Adversary Proceeding and any and all claims asserted therein and CMM agrees to
dismiss with prejudice the Counterclaim and any and all claims asserted therein
within 20 days after the Settlement Date.
6. Mutual Release. Except as it pertains to each party's performance under
this Agreement and effective upon the entry of the Order, with respect to the
Loan Documents and the Custodian Agreement and any claims arising from the Loan
Documents and the Custodian Agreement, the Parties waive any and all claims
against the other as follows:
a. CMM Release. For valuable consideration, and the mutual covenants and
agreements contained herein, with respect to any and all claims arising in
connection with the Loan Documents and the Custodian Agreement, CMM, on behalf
of itself, its estate, its affiliate debtors, its agents and employees, and its
predecessors, successors and assigns, fully and forever releases FUNB, and its
affiliates, directors, officers, shareholders, employees, agents, attorneys,
investment advisors, portfolio managers, trustees, ancillary trustees,
beneficiaries and their affiliates, successors and assigns, and their respective
partners, shareholders, officers, directors and employees and all persons acting
by, through, under or in concert with them (collectively, "First Union"), or any
of them, of and from any and all manner of action or actions, cause or causes of
action, in law or in equity, suits, debts, liens, contracts, agreements,
promises, liability, claims, demands, damages, losses, costs or expenses of any
nature whatsoever, known or unknown, fixed or contingent, which CMM and/or the
estate now has or may hereafter have against FUNB or First Union.
b. FUNB Release. For valuable consideration, and the mutual covenants and
agreements contained herein, with respect to any and all claims arising in
connection with the Loan Documents and the Custodian Agreement, FUNB, on behalf
of itself, its agents and employees, and its predecessors, successors and
assigns, fully and forever releases CMM, its estate, its affiliates, directors,
officers, shareholders, employees, agents, attorneys, investment advisors,
portfolio managers, trustees, ancillary trustees, beneficiaries and their
affiliates, successors and assigns, and their respective partners, shareholders,
officers, directors and
employees and all persons acting by, through under or in concert with them,
or any of them (collectively, the "CMM Parties"), of and from any and all manner
of action or actions, cause or causes of action, in law or in equity, suits,
debts, liens, contracts, agreements, promises, liability, claims, demands,
damages, losses, costs or expenses of any nature whatsoever, known or unknown,
fixed or contingent, which FUNB now has or may have hereafter against CMM or any
of the CMM Parties.
7. Binding Effect. This Agreement shall be binding in this Bankruptcy Case
or any other bankruptcy proceeding commenced by or against CMM.
8. Effective Date. This Agreement shall become effective (the "Effective
Date") on the third business day to occur ten (10) days after the date when an
order (the "Order") approving this Agreement is entered by the Court and said
Order has not been reversed or stayed and as to which the time to appeal has
expired and no appeal or petition to review or rehearing is pending or is being
sought or, with respect to which any appeal has been finally decided and no
further appeal can be taken or appellate review granted.
9. Modifications. No alteration, amendment, change, waiver, termination or
other modification of this Agreement shall be binding upon any party hereto or
have any other force or effect unless the same shall be in writing and signed by
each of the parties hereto and approved by the Court.
10. Jurisdiction. The Court shall retain jurisdiction over any and all
controversies, disputes, claims or other matters arising under or otherwise
relating to this Agreement.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument.
12. Waiver. The parties to this Agreement hereby agree to waive any and all
right they may have to appeal the entry of the Order pursuant to Rule 8001 of
the Federal Rules of Bankruptcy Procedure.
13. Disputed Claims. FUNB and CMM agree that this Agreement is a compromise
settlement of disputed and undetermined claims, the existence of and liability
for which are expressly denied; and that this Agreement, the consideration
therefor, and all negotiations relating thereto are for settlement purposes only
and shall not be deemed or construed for any purpose as an admission of
liability or responsibility for or participation in any unlawful or wrongful act
at any time by any party hereto or any other person or entity. The acceptance
and execution of this Agreement are not, and shall not be construed as, an
admission or concession of liability or wrongdoing by any party hereto, or as an
admission or concession by any party hereto concerning the merits of its claims
or defenses.
14. Binding Obligations. Each party expressly warrants and represents to
each other party hereto: (a) that such party is duly authorized and empowered to
enter into this Agreement and perform and observe its agreements and obligations
herein; and, (b) that upon the execution
and approval by the Court of the Order, this Agreement shall create and
constitute a binding obligation on such party and his, her, and/or its
successors and assigns. This Agreement shall be binding upon and inure to the
benefit of all parties hereto, their respective predecessors, successors,
representatives, heirs, executors, administrators, assigns, and each of them.
15. Superseding Effect. This Agreement shall supersede any and all prior
orders, stipulations and all other binding instruments governing the use, sale,
control, distribution, and ownership of all funds and property referenced
herein.
16. Entire Agreement. This Agreement is the sole, only, entire and complete
Agreement of the parties on or in any way relating to the subject hereof. No
consideration has been or is offered, promised, expected or held out other than
as provided herein, and no conditions precedent to the effectiveness of this
Agreement exist other than as expressly so provided in this Agreement.
[Signatures on the following page]
IN WITNESS WHEREOF, each of the Parties has executed this Agreement as of
the date first set forth above.
CRIIMI MAE INC.
/s/ H. Xxxxxxx Xxxxxxxxxx
-----------------------------
Name: H. Xxxxxxx Xxxxxxxxxx
Title: President
FIRST UNION NATIONAL BANK
/s/X. X. Xxxxxxx
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Name: X. X. Xxxxxxx
Title: Senior Vice President
