AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 22, 1997
REGISTRATION NO.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
REDWOOD TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 591 REDWOOD HIGHWAY, SUITE 3100 68-0329422
(STATE OR OTHER JURISDICTION OF MILL VALLEY, CA 94941 (I.R.S. EMPLOYER I.D. NUMBER)
INCORPORATION OR ORGANIZATION) (415) 389-7373
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES)
------------------------
GEORGE E. BULL, III
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
REDWOOD TRUST, INC.
591 REDWOOD HIGHWAY, SUITE 3100
MILL VALLEY, CA 94941
(415) 389-7373
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
DOUGLAS B. HANSEN PHILLIP R. POLLOCK, ESQ.
PRESIDENT AND CHIEF FINANCIAL OFFICER TOBIN & TOBIN
REDWOOD TRUST, INC. ONE MONTGOMERY STREET, 15TH FLOOR
591 REDWOOD HIGHWAY, SUITE 3100 SAN FRANCISCO, CA 94104
MILL VALLEY, CA 94941 (415) 433-1400
(415) 389-7373
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
At any time and from time to time after the effective date of this Registration
Statement in light of market conditions and other factors.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
- ---------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
- ---------------
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
============================================================================================================================
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2)(6) FEE(3)(6)
- ----------------------------------------------------------------------------------------------------------------------------
Preferred Stock, $.01 per value per share(4)....
Preferred Stock Warrants(4).....................
Common Stock, $.01 per value per share(4)(5).... $300,000,000 $300,000,000 $90,909.09
Common Stock Warrants(4)(5).....................
Shareholders Rights.............................
- ----------------------------------------------------------------------------------------------------------------------------
Total.................................. $300,000,000 $300,000,000 $90,909.09
============================================================================================================================
(1) In no event will the aggregate maximum offering price of all securities
issued pursuant to this Registration Statement exceed $300,000,000.00,
except as described in Footnote (6), below. Any securities registered
hereunder may be sold separately or as units with other securities
registered hereunder.
(2) The proposed maximum aggregate price per share will be determined, from time
to time, by the Registrant in connection with the issuance by the Registrant
of the securities registered hereunder.
(3) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended (the "Rule(s)").
(4) Subject to Footnote (1), there is being registered hereunder an
indeterminate number of shares of Preferred Stock and Common Stock as may be
sold, from time to time, by the Registrant, or as may be issued pursuant to
the conversion of Preferred Stock or the exercise of warrants or shareholder
rights.
(5) The aggregate amount of Common Stock registered hereunder is limited, solely
for purposes of any at the market offering, to that which is permissible
under Rule 415(a)(4).
(6) Pursuant to Rule 429(b), this offering shall also include $84,075,000.00,
the amount remaining under the Registrant's previous Universal Shelf
Registration Statement, Reg. No. 333-11665, the Registration Fee of
$28,991.38 for such amount having been previously paid with the earlier
registration. ------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
------------------------
Pursuant to Rule 429(b), the Prospectus contained in this Registration
Statement also relates to Registration No. 333-11665, filed by Registrant and
declared effective September 19, 1996.
================================================================================
COMMON STOCK, PREFERRED STOCK, WARRANTS,
AND SHAREHOLDER RIGHTS TO PURCHASE COMMON STOCK AND PREFERRED STOCK
$300,000,000
RWT
REDWOOD TRUST, INC.
------------------------
Redwood Trust, Inc., a Maryland corporation ("Redwood Trust" or the
"Company"), specializes in acquiring and managing real estate mortgage loans.
Such loans are originated by others to the Company's specifications or to
specifications approved by the Company. The Company has acquired mortgage loans
secured by single-family real estate properties throughout the United States,
with a special emphasis on properties located in the State of California, and
may in the future acquire mortgage loans secured by multifamily and commercial
real estate properties. The Company's mortgage loans may be acquired as whole
loans or as mortgage securities evidencing interests in pools of mortgage loans
(collectively, "Mortgage Assets"). The Company is self-advised and self-managed
and its principal business objective is to generate net income for distribution
to stockholders. The Company has elected to be subject to tax as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), and generally will not be subject to tax on its Federal income to
the extent that it distributes its earnings to its stockholders and it maintains
its qualification as a REIT.
The Company, directly or through agents, dealers or underwriters designated
from time to time, may issue and sell from to time one or more of the following
types of its securities (the "Securities"): (i) shares of its common stock, par
value $0.01 per share ("Common Stock"); (ii) shares of its preferred stock, in
one or more classes or series ("Preferred Stock"), (iii) warrants to purchase
shares of Common Stock ("Common Stock Warrants"); (iv) warrants to purchase
Preferred Stock ("Preferred Stock Warrants"); (v) rights to purchase shares of
Common Stock or Preferred Stock issued to shareholders ("Shareholders Rights");
and (vi) any combination of the foregoing, either individually or as units
consisting of one or more of the foregoing types of Securities. The Securities
offered pursuant to this Prospectus may be issued in one or more classes or
series, in amounts, at prices and on terms to be determined at the time of the
offering of each such class or series and set forth in a supplement to this
Prospectus (a "Prospectus Supplement"). The Securities offered by the Company
pursuant to this Prospectus will be limited to $300,000,000 aggregate initial
public offering price, including the exercise price of any Common Stock
Warrants, Preferred Stock Warrants (collectively, "Securities Warrants") or
Shareholders Rights, plus the amount remaining under the Company's previous
Universal Shelf Registration Statement, Registration No. 333-11665.
The specific terms of each offering of Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement relating to such offering of Securities. Such specific terms include,
without limitation, to the extent applicable (1) in the case of any class or
series of Preferred Stock, the specific designations, rights, preferences,
privileges and restrictions of such class or series of Preferred Stock,
including the dividend rate or rates or the method for calculating same,
dividend payment dates, voting rights, liquidations preferences, and any
conversion, exchange, redemption or sinking fund provisions; (2) in the case of
the Securities Warrants, Preferred Stock or Common Stock, as applicable, for
which each such warrant is exercisable, the exercise price, duration,
detachability and call provisions of each such warrant; (3) in the case of
Shareholder Rights, which entitles the shareholder to purchase Preferred Stock
or Common Stock, as applicable, the subscription price, duration,
transferabilities and the over subscription privilege of each of the Shareholder
Rights; and (4) in the case of any offering of Securities, to the extent
applicable, the initial public offering price or prices, listing on any
securities exchange, certain federal income tax consequences and the agents,
dealers or underwriters, if any, participating in the offering and sale of the
Securities.
The Company's Common Stock is currently quoted on the Nasdaq National Market
("Nasdaq" or the "Nasdaq National Market") under the symbol "RWTI." On April 21,
1997, the last reported sales price for the Common Stock was $42.50 per share.
The Company also currently has one class of authorized, issued and outstanding
Preferred Stock, the Class B 9.74% Cumulative Convertible Preferred Stock (the
"Class B Preferred Stock"), which is quoted on the Nasdaq National Market under
the symbol "RWTIP," and an issue of Stock Purchase Warrants, quoted under the
symbol "RWTIW." On April 21, 1997, the last reported sales price for the Class B
Preferred Stock and Stock Purchase Warrants was $42.50 per share and $30.00 per
share, respectively. The shares of Common Stock and Class B Preferred Stock, and
the securities offered herein, are subject to repurchase by the Company under
certain conditions and are subject to certain restrictions on ownership and
transferability which prohibit any person (either alone or with others as a
group) from owning a number of shares in excess of 9.8% of the outstanding
shares of the Company's capital stock, subject to certain exceptions. See
"Description of Securities -- Repurchase of Shares and Restrictions on Transfer"
and "Plan of Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement. The delivery in any jurisdiction of this
Prospectus together with a Prospectus Supplement relating to specific Securities
shall not constitute an offer in such jurisdiction of any other Securities
covered by this Prospectus but not described in such Prospectus Supplement.
------------------------
The date of this Prospectus is April , 1997.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission" or "SEC"). Reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices located at
Seven World Trade Center, 13th Floor, New York, New York 10048, and at 500 West
Madison Street, Chicago, Illinois 60661. Copies may also be obtained from the
Public Reference section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Common Stock, Stock Purchase
Warrants and Class B Preferred Stock of the Company are currently quoted on the
Nasdaq National Market. Reports, proxy statements and other information
concerning the Company may be inspected at the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. In
addition, holders of the Common Stock and Class B Preferred Stock will receive
annual reports containing audited financial statements with a report thereon by
the Company's independent certified public accountants, and quarterly reports
containing unaudited summary financial information for each of the first three
quarters of each fiscal year.
The Company files information electronically with the Commission, and the
Commission maintains a Web Site that contains reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. The address of the Commission's
Web Site is .
Copies of the Registration Statement on Form S-3 of which this Prospectus
forms a part and exhibits thereto are on file at the offices of the Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus omits certain of the information contained in the Registration
Statement, and reference is hereby made to the Registration Statement for
further information with respect to the Company and the Securities offered
hereby. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and in each
instance reference is made to a copy of such contract or other document filed as
an exhibit to the Registration Statement or otherwise filed with the SEC and
incorporated by reference herein. Each such statement is qualified in its
entirety by such contract or other document reference.
The Company currently furnishes its shareholders with annual reports
containing financial statements audited by its independent auditors and with
quarterly reports containing unaudited summary financial information for each of
the first three quarters of each fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference the following documents
heretofore filed by the Company with the Commission:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 as amended by Form 10-K/A filed on April 3, 1997;
(b) The Company's Current Report on Form 8-K filed on January 7, 1997;
and
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, as amended (Reg. No.
0-26436), filed July 17, 1996, under the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities made hereby shall be deemed to
be incorporated by reference into this Prospectus.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained in the Registration Statement, this Prospectus, or
any other subsequently filed document that is also incorporated by reference
herein modifies or supersedes that
2
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of that person, a copy of any document incorporated herein by
reference (other than exhibits to those documents unless the exhibits are
specifically incorporated herein by reference into the documents that this
Prospectus incorporates by reference). Requests should be directed to Ms. Vickie
L. Rath, Vice-President, Treasurer and Controller, Redwood Trust, Inc., 591
Redwood Highway, Suite 3100, Mill Valley, California 94941, telephone (415)
389-7373.
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THE COMPANY
The Company was incorporated in the State of Maryland on April 11, 1994 and
commenced operations on August 19, 1994. It acquires and manages Mortgage Assets
financed by the proceeds of equity offerings and by borrowings. The Company
produces net interest income on Mortgage Assets qualifying as Qualified REIT
Real Estate Assets while maintaining strict cost controls in order to generate
net income for distribution to its stockholders. The Company intends to continue
operating in a manner that will permit it to maintain its qualification as a
REIT for Federal income tax purposes. Assuming it retains such REIT status, the
Company will generally not be subject to tax on its Federal income to the extent
that it distributes that income to stockholders in the form of dividends. The
principal executive offices of the Company are located at 591 Redwood Highway,
Suite 3100, Mill Valley, California 94941, telephone (415) 389-7373.
The Company is self-advised and self-managed. The management team of the
Company has considerable expertise in the acquisition and management of Mortgage
Assets, mortgage finance, asset/liability management and the management of
corporations in the real estate lending business, including banks, savings and
loans and life insurance companies. In addition to working with healthy real
estate assets and healthy real estate lending institutions, the management of
the Company also has experience managing the assets of several failed life
insurance companies during rehabilitation, managing and advising a number of
troubled savings and loans and banks, and overseeing the workout and liquidation
process for large portfolios of troubled commercial real estate mortgages and
equity investments. Reference to the "Company" herein shall include any taxable
or Qualified REIT Subsidiaries through which the Company may conduct its
business.
Additional information regarding the Company, including the audited
financial statements of the Company and descriptions of the Company's currently
outstanding common and preferred stock and warrants, is contained in the
documents incorporated by reference herein. See "Incorporation of Certain
Information by Reference," above.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the net proceeds from the sale of Securities offered by
the Company will be available for the general corporate purposes of the Company.
These general corporate purposes may include, without limitation, repayment of
maturing obligations, redemption of outstanding indebtedness, financing future
acquisitions (including, but not limited to, acquisitions of Mortgage Assets and
other mortgage related products), capital expenditures and working capital.
Pending any such uses, the Company may invest the net proceeds from the sale of
any Securities or may use them to reduce short-term indebtedness. If the Company
intends to use the net proceeds from a sale of Securities to finance a
significant acquisition, a related Prospectus Supplement will describe the
material terms of such acquisition.
DESCRIPTION OF SECURITIES
The following is a brief description of the material terms of the Company's
Securities. This description does not purport to be complete and is subject in
all respects to applicable Maryland law and to the provision of the Company's
Articles of Incorporation and Bylaws, including any applicable amendments or
supplements thereto, copies of which are on file with the Commission as
described under "Available Information" and are incorporated by reference
herein.
GENERAL
The Company may offer under this Prospectus one or more of the following
categories of its Securities: (i) shares of its Common Stock, par value $0.01
per share; (ii) shares of its Preferred Stock, in one or more classes or series;
(iii) Common Stock Warrants; (iv) Preferred Stock Warrants; (v) Shareholder
Rights; and (vi) any combination of the foregoing, either individually or as
units consisting of one or more of the foregoing
4
types of Securities. The terms of any specific offering of Securities, including
the terms of any units offered, will be set forth in a Prospectus Supplement
relating to such offering.
The Company's current authorized equity capitalization consists of 50
million shares which may be comprised of Common Stock and Preferred Stock. The
Common Stock and the only currently issued, authorized and outstanding Preferred
Stock, the Class B Preferred Stock, are listed on the Nasdaq National Market,
and the Company intends to list any additional shares of its Common Stock which
are issued and sold hereunder, as described in the Prospectus Supplement
relating to such Common Stock on Nasdaq or a national securities exchange
subject to official notice of issuance. The Company may elect to list any future
class or series of securities on Nasdaq or an exchange, but is not obligated to
do so. The Company's sole outstanding issue of warrants is the series of Stock
Purchase Warrants issued in connection with the Company's 1994 private
placement. Such warrants are exercisable for Common Stock and are listed on the
Nasdaq National Market. As of April 21, 1997, 272,304 such warrants remained
outstanding.
COMMON STOCK
As of April 21, 1997, there were 13,005,957 outstanding shares of Common
Stock held by approximately 200 holders of record. Holders of Common Stock are
entitled to receive dividends when, as and if declared by the Board of
Directors, out of funds legally available therefor. In the case of the Class B
Preferred Stock and possibly in the event any future class or series of
Preferred Stock is issued, dividends on any outstanding shares of Preferred
Stock are required to be paid in full before payment of any dividends on the
Common Stock. Upon liquidation, dissolution or winding up of the Company,
holders of Common Stock are entitled to share ratably in assets available for
distribution after payment of all debts and other liabilities and subject to the
prior rights of any holders of any Preferred Stock then outstanding. There are
no preemptive or other subscription rights, conversion rights, or redemption or
sinking fund provisions with respect to shares of Common Stock.
Holders of Common Stock are entitled to one vote per share with respect to
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the Common Stock entitled
to vote in any election of directors may elect all of the directors standing for
election, subject to the voting rights (if any) of any class or series of
Preferred Stock that may be outstanding from time to time. The Company's Charter
and Bylaws contain no restrictions on the repurchase by the Company of shares of
the Common Stock. All the outstanding shares of Common Stock are, and additional
shares of Common Stock will be, validly issued, fully paid and nonassessable.
PREFERRED STOCK
Subject to the terms of the outstanding Class B Preferred Stock, the Board
of Directors is authorized to designate with respect to each class or series of
Preferred Stock the number of shares in each such class or series, the dividend
rates and dates of payment, voluntary and involuntary liquidation preferences,
redemption prices, if any, whether or not dividends shall be cumulative, and, if
cumulative, the date or dates from which the same shall be cumulative, the
sinking fund provisions if any, and the terms and conditions on which shares can
be converted into or exchanged for shares of another class or series, and the
voting rights, if any. As of April 21, 1997, there are 999,638 shares of Class B
Preferred Stock issued and outstanding.
Any Preferred Stock issued will rank prior to the Common Stock as to
dividends and as to distributions in the event of liquidations, dissolution or
winding up of the Company. The ability of the Board of Directors to issue
Preferred Stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, adversely
affect the voting powers of holders of Common Stock. The Class B Preferred Stock
is, and any future shares of Preferred Stock will be, validly issued, fully paid
and nonassessable.
SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Common Stock
or Preferred Stock. Such warrants are referred to herein as Common Stock
Warrants and Preferred Stock Warrants, as appropriate. Securities Warrants may
be issued independently or together with any other Securities covered by the
Registration Statement offered by this Prospectus and any accompanying
Prospectus Supplement and may
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be attached to or separate from such other Securities. Each issuance of
Securities Warrants will be issued under a separate agreement ("Securities
Warrant Agreement") to be entered into between the Company and a bank or trust
company, as agent ("Securities Warrant Agent"), all as set forth in the
Prospectus Supplement relating to the particular issue of offered Securities
Warrants. Each issue of Securities Warrants will be evidenced by warrant
certificates (the "Securities Warrant Certificates"). The Securities Warrant
Agent will act solely as an agent of the Company in connection with the
Securities Warrant Certificates and will not assume any obligation or
relationship of agency or trust for or with any holders of Securities Warrant
Certificates or beneficial owners of Securities Warrants.
If future Securities Warrants are offered pursuant to this prospectus, the
applicable Prospectus Supplement will describe the terms of such Securities
Warrants, including the following where applicable: (i) the offering price; (ii)
the aggregate number of shares purchasable upon exercise of such Securities
Warrants, and in the case of Securities Warrants for Preferred Stock, the
designation, aggregate number and terms of the class or series of Preferred
Stock purchasable upon exercise of such Securities Warrants; (iii) the
designation and terms of the Securities with which such Securities Warrants are
being offered and the number of such Securities Warrants being offered with each
such Security; (iv) the date on and after which such Securities Warrants and the
related Securities will be transferable separately; (v) the number of shares of
Preferred Stock or shares of Common Stock purchasable upon exercise of each such
Securities Warrant and the price at which such number of shares of Preferred
Stock of such class or series or shares of Common Stock may be purchased upon
such exercise; (vi) the date on which the right to exercise such Securities
Warrants shall commence and the expiration date on which such right shall
expire, (vii) certain Federal income tax consequences; and (viii) any other
material terms of such Securities Warrants.
No Rights as Stockholders. Holders of future Securities Warrants, if any,
will not be entitled by virtue of being such holders, to vote, to consent, to
receive dividends, to receive notice as shareholders with respect to any meeting
of stockholders for the election of directors of the Company or any other
matter, or to exercise any rights whatsoever as stockholders of the Company.
STOCKHOLDER RIGHTS
General. The Company may issue, as a dividend at no cost, Stockholder
Rights to holders of record of the Company's Securities or any class or series
thereof on the applicable record date. If Stockholder Rights are so issued to
existing holders of Securities each Stockholder Right will entitle the
registered holder thereof to purchase the Securities pursuant to the terms set
forth in the applicable Prospectus Supplement.
If Stockholder Rights are issued, the applicable Prospectus Supplement will
describe the terms of such Stockholder Rights including the following where
applicable: (i) record date; (ii) the subscription price; (iii) Subscription
Agent; (iv) the aggregate number of shares of Preferred Stock or shares of
Common Stock purchasable upon exercise of such Stockholder Rights and in the
case of Stockholder Rights for Preferred Stock, the designation, aggregate
number and terms of the class or series of Preferred Stock purchasable upon
exercise of such Stockholder Rights; (v) the date on and after which such
Stockholder Rights and the related Securities will be transferable separately;
(vi) the date on which the right to exercise such Stockholder Rights shall
commence and the expiration date on which such right shall expire; (vii) certain
Federal income tax consequences; and (viii) any other material terms of such
Stockholder Rights.
In addition to the terms of the Stockholder Rights and the Securities
issuable upon exercise thereof, the Prospectus Supplement will describe, for a
holder of such Stockholder Rights who validly exercises all Stockholder Rights
issued to such holder, how to subscribe for unsubscribed Securities (issuable
pursuant to unexercised Stockholder Rights issued to other holders) to the
extent such Stockholder Rights have not been exercised.
No Rights as Shareholders. Holders of Stockholder Rights will not be
entitled by virtue of being such holders, to vote, to consent, to receive
dividends, to receive notice as stockholders with respect to any meeting of
stockholders for the election of directors of the Company or any other matter,
or to exercise any rights whatsoever as stockholders of the Company.
6
REPURCHASE OF SHARES AND RESTRICTIONS ON TRANSFER
In order that the Company may meet the requirements for qualification as a
REIT at all times, the Charter prohibits any person from acquiring or holding,
directly or constructively, ownership of a number of shares of Common Stock and
Preferred Stock (collectively, "Capital Stock") in excess of 9.8% (the
"Ownership Limit") of the outstanding shares. For this purpose the term
"ownership" generally means either direct ownership or constructive ownership in
accordance with the constructive ownership provisions of Section 544 of the
Code.
Under the constructive ownership provisions of Section 544 of the Code, a
holder of a warrant will be treated as owning the number of shares of Capital
Stock into which such warrant may be converted. In addition, the constructive
ownership rules generally attribute ownership of securities owned by a
corporation, partnership, estate or trust proportionately to its stockholders,
partners or beneficiaries, attribute ownership of securities owned by family
members to other members of the same family, and set forth rules as to when
securities constructively owned by a person are considered to be actually owned
for the application of such attribution provisions (i.e., "reattribution"). For
purposes of determining whether a person holds or would hold Capital Stock in
excess of the Ownership Limit, a person will thus be treated as owning not only
shares of Capital Stock actually owned, but also any shares of Capital Stock
attributed to such person under the attribution rules described above (including
any shares of Capital Stock attributed to such person by reason of such person's
ownership of warrants). Accordingly, a person who individually owns less than
9.8% of the shares outstanding may nevertheless be in violation of the Ownership
Limit.
Any transfer of shares of Capital Stock or warrants that would result in
disqualification of the Company as a REIT or that would (a) create a direct or
constructive ownership of shares of stock in excess of the Ownership Limit, (b)
result in the shares of stock being beneficially owned (within the meaning of
Section 856(a) of the Code) by fewer than 100 persons (determined without
reference to any rules of attribution), or (c) result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, will be null
and void, and the intended transferee will acquire no rights to such shares or
warrants. The foregoing restrictions on transferability and ownership will not
apply if the Board of Directors determines that it is no longer in the best
interests of the Company to continue to qualify as a REIT. The Company's Board
of Directors, upon receipt of a ruling from the IRS, an opinion of counsel or
other evidence satisfactory to the Board of Directors, may also waive the
Ownership Limit with respect to a purported transferee. As a condition to such
waiver the intended transferee must give written notice to the Company of the
proposed transfer no later than the fifteenth day prior to any transfer which,
if consummated, would result in the intended transferee owning shares in excess
of the Ownership Limit. The Board of Directors may also take such other action
as it deems necessary or advisable to protect the Company's status as a REIT.
Any purported transfer of shares or warrants that would result in a person
owning (directly or constructively) shares in excess of the Ownership Limit
(except as otherwise waived by the Board of Directors as set forth above) due to
the unenforceability of the transfer restrictions set forth above will
constitute "Excess Securities," which will be transferred by operation of law to
the Company as trustee for the exclusive benefit of the person or persons to
whom the Excess Securities are ultimately transferred, until such time as the
purported transferee retransfers the Excess Securities. While the Excess
Securities are held in trust, a holder of such securities will not be entitled
to vote or to share in any dividends or other distributions with respect to such
securities and will not be entitled to exercise or convert such securities into
shares of Capital Stock. Subject to the Ownership Limit, Excess Securities may
be transferred by the purported transferee to any person (if such transfer would
not result in Excess Securities) at a price not to exceed the price paid by the
purported transferee (or, if no consideration was paid by the purported
transferee, the fair market value of the Excess Securities on the date of the
purported transfer), at which point the Excess Securities will automatically be
exchanged for the stock or warrants, as the case may be, to which the Excess
Securities are attributable. If a purported transferee receives a higher price
for designating an ultimate transferee, such purported transferee shall pay, or
cause the ultimate transferee to pay, such excess to the Company. In addition,
such Excess Securities held in trust are subject to purchase by the Company at a
purchase price equal to the lesser of (a) the price per share or per warrant, as
the case may be, in the transaction that created such Excess Securities (or, in
the case of a devise or gift, the market price at the time of such devise or
gift),
7
reduced by the amount of any distributions received in violation of the Charter
that have not been repaid to the Company, and (b) the market price as reflected
in the last reported sales price of such shares of stock or warrants on the
trading day immediately preceding the date of the purchase by the Company as
reported on any exchange or quotation system over which such shares of stock or
warrants may be traded, or if not then traded over any exchange or quotation
system, then the market price of such shares of stock or warrants on the date of
the purported transfer as determined in good faith by the Board of Directors of
the Company, reduced by the amount of any distributions received in violation of
the Charter that have not been repaid to the Company.
From and after a purported transfer to the transferee of the Excess
Securities, the purported transferee shall cease to be entitled to
distributions, voting rights and other benefits with respect to such shares of
the stock or warrants except the right to payment of the purchase price for the
shares of stock or warrants or the retransfer of securities as provided above.
Any dividend or distribution paid to a purported transferee on Excess Securities
prior to the discovery by the Company that such shares of stock or warrants have
been transferred in violation of the provisions of the Company's Charter shall
be repaid to the Company upon demand. If the foregoing transfer restrictions are
determined to be void, invalid or unenforceable by a court of competent
jurisdiction, then the purported transferee of any Excess Securities may be
deemed, at the option of the Company, to have acted as an agent on behalf of the
Company in acquiring such Excess Securities and to hold such Excess Securities
on behalf of the Company.
All certificates representing shares of stock and warrants will bear a
legend referring to the restrictions described above.
Any person who acquires shares or warrants in violation of the Charter, or
any person who is a purported transferee such that Excess Securities results,
must immediately give written notice or, in the event of a proposed or attempted
transfer that would be void as set forth above, give at least 15 days prior
written notice to the Company of such event and shall provide to the Company
such other information as the Company may request in order to determine the
effect, if any, of such transfer on the Company's status as a REIT. In addition,
every record owner of more than 5.0% (during any period in which the number of
stockholders of record is 2,000 or more) or 1.0% (during any period in which the
number of stockholders of record is greater than 200 but less than 2,000) or
1/2% (during any period in which the number of stockholders is 200 or less) of
the number or value of the outstanding shares of Capital Stock of the Company
must give an annual written notice to the Company by January 31, stating the
name and address of the record owner, the number of shares held and describing
how such shares are held. Further, each stockholder shall upon demand be
required to disclose to the Company in writing such information with respect to
the direct and constructive ownership of shares of Capital Stock as the Board of
Directors deems reasonably necessary to comply with the REIT Provisions of the
Code, to comply with the requirements of any taxing authority or governmental
agency or to determine any such compliance.
Subject to certain limitations, the Board of Directors may increase or
decrease the Ownership Limit. In addition, to the extent consistent with the
REIT Provisions of the Code, the Board of Directors may waive the Ownership
Limit for and at the request of certain purchasers in an offering pursuant to
this Prospectus and any applicable Prospectus Supplement.
The provisions described above may inhibit market activity and the
resulting opportunity for the holders of the Company's Capital Stock and
Warrants to receive a premium for their shares or warrants that might otherwise
exist in the absence of such provisions. Such provisions also may make the
Company an unsuitable investment vehicle for any person seeking to obtain
ownership of more than 9.8% of the outstanding shares of Capital Stock.
CONTROL SHARE ACQUISITIONS
The Maryland General Corporation Law (the "Maryland GCL") provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes entitled to be cast on the matter, excluding shares of
stock owned by the acquiror or by officers or directors who are employees of the
corporation. "Control shares" are voting
8
shares of stock which, if aggregated with all other shares of stock previously
acquired by such a person, would entitle the acquiror to exercise voting power
in electing directors within one of the following ranges of voting power: (i)
one-fifth or more but less than one-third, (ii) one-third or more but less than
a majority, or (iii) a majority or more of all voting power. "Control shares" do
not include shares of stock the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means, subject to certain exceptions, the acquisition of, ownership
of, or the power to direct the exercise of voting power with respect to, control
shares.
A person who has made or proposes to make a "control share acquisition,"
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the Board of Directors to call a special meeting of
stockholders to be held within 50 days of demand to consider the voting rights
of the shares. If no request for a meeting is made, the corporation may itself
present the question at any stockholders' meeting. If voting rights are not
approved at the meeting or if the acquiring person does not deliver an acquiring
person statement as permitted by the statute, then, subject to certain
conditions and limitations, the corporation may redeem any or all of the
"control shares" (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights, as of the date of the last control share acquisition or of any meeting
of stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for "control shares" are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The fair
value of the stock as determined for purposes of such appraisal rights may not
be less than the highest price per share paid in the control share acquisition,
and certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of "control share acquisitions."
The "control share acquisition" statute does not apply to stock acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a provision of the
Charter or Bylaws of the corporation adopted prior to the acquisition of the
shares.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, LLC is the transfer agent and registrar
with respect to the Common Stock, the Class B Preferred Stock and the Warrants.
9
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of certain Federal income tax
considerations to the Company and to holders of the Securities. It is based on
existing Federal income tax law, which is subject to change, possibly
retroactively. PROSPECTIVE INVESTORS ARE ADVISED TO REVIEW THE MORE SPECIFIC
DISCLOSURE IN THE APPLICABLE PROSPECTUS SUPPLEMENT AND TO CONSULT THEIR TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE SECURITIES,
INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME
AND OTHER TAX LAWS.
GENERAL
The Company has elected to become subject to tax as a REIT, for Federal
income tax purposes, commencing with the taxable year ending December 31, 1994.
The Board of Directors of the Company currently expects that the Company will
continue to operate in a manner that will permit the Company to maintain its
qualifications as a REIT for the taxable year ending December 31, 1997, and in
each taxable year thereafter. This treatment will permit the Company to deduct
dividend distributions to its stockholders for Federal income tax purposes, thus
effectively eliminating the "double taxation" that generally results when a
corporation earns income and distributes that income to its stockholders.
In the opinion of Giancarlo & Gnazzo, A Professional Corporation, special
tax counsel to the Company ("Special Tax Counsel"), the Company has been
organized and operated in a manner which qualifies it as a REIT under the Code
since the commencing of its operations on August 19, 1994 through December 31,
1996, the date of the Company's latest audited financial statements received by
Special Tax Counsel, and the Company's current and contemplated methods of
operation, as represented by the Company, will enable it to continue to so
qualify. This opinion is based on various assumptions relating to the
organization and operation of the Company to date and in the future and is
conditioned upon certain representations made by the Company as to certain
factual matters. The continued qualification and taxation of the Company as a
REIT will depend upon the Company's ability to meet, on a continuing basis,
distribution levels and diversity of stock ownership, and various other
qualification tests imposed by the Code. This opinion is based on the law
existing and in effect on the date hereof which is subject to change, possibly
retroactively.
There can be no assurance that the Company will continue to qualify as a
REIT in any particular taxable year, given the highly complex nature of the
rules governing REITs, the ongoing importance of factual determinations and the
possibility of future changes in the circumstances of the Company. If the
Company were not to qualify as a REIT in any particular year, it would be
subject to Federal income tax as a regular domestic corporation, and its
stockholders would be subject to potentially substantial income tax liability in
respect of each taxable year that it fails to qualify as a REIT, and the amount
of earnings and cash available for distribution to its stockholders could be
significantly reduced or eliminated.
TAXATION OF THE COMPANY
In any year in which the Company qualifies as a REIT, the Company will
generally not be subject to Federal income tax on that portion of its REIT
taxable income or capital gain which is distributed to its stockholders. The
Company will, however, be subject to Federal income tax at normal corporate
income tax rates upon any undistributed taxable income or capital gain and may
also be subject to tax in certain other circumstances.
If the Company fails to qualify as a REIT in any taxable year and certain
relief provisions of the Code do not apply, the Company would be subject to
Federal income tax (including any applicable alternative minimum tax) on its
taxable income at the regular corporate income tax rates. Distributions to
stockholders in any year in which the Company fails to qualify as a REIT would
not be deductible by the Company, nor would they generally be required to be
made under the Code. Further, unless entitled to relief under certain other
provisions of the Code, the Company would also be disqualified from re-electing
REIT status for the four taxable years following the year during which it became
disqualified.
10
TAXATION OF SECURITIES HOLDERS
COMMON STOCK AND PREFERRED STOCK GENERALLY
Distributions (including constructive distributions) made to holders of
Common Stock or Preferred Stock, other than tax-exempt entities, will generally
be subject to tax as ordinary income to the extent of the Company's current and
accumulated earnings and profits as determined for Federal income tax purposes.
If the amount distributed exceeds a stockholder's allocable share of such
earnings and profits, the excess will be treated as a return of capital to the
extent of the stockholder's adjusted basis in its shares, which will not be
subject to tax, and thereafter as a taxable gain from the sale or exchange of a
capital asset.
Distributions designated by the Company as capital gain dividends will
generally be subject to tax as long-term capital gain to stockholders, to the
extent that the distribution does not exceed the Company's actual net capital
gain for the taxable year. Distributions by the Company, whether characterized
as ordinary income or as capital gain, are not eligible for the corporate
dividends received deduction. In the event that the Company realizes a loss for
the taxable year, stockholders will not be permitted to deduct any share of that
loss. Further, if the Company (or a portion of its assets) were to be treated as
a taxable mortgage pool, any "excess inclusion income" that is allocated to a
stockholder would not be allowed to be offset by a net operating loss of such
stockholder. Future Treasury Department regulations may require that the
stockholders take into account, for purposes of computing their individual
alternative minimum tax liability, certain tax preference items of the Company.
Dividends declared during the last quarter of a taxable year and actually
paid during January of the following taxable year are generally treated as if
received by the stockholder on the record date of the dividend payment and not
on the date actually received. In addition, the Company may elect to treat
certain other dividends distributed after the close of the taxable year as
having been paid during such taxable year, but stockholders still will be
treated as having received such dividend in the taxable year in which the
distribution is made.
Upon a sale or other disposition of either Common Stock or Preferred Stock,
a stockholder will generally recognize a capital gain or loss in an amount equal
to the difference between the amount realized and the stockholder's adjusted
basis in such stock, which gain or loss will be long-term if the stock has been
held for more than one year. Any loss on the sale or exchange of shares held by
a stockholder for six months or less will generally be treated as a long-term
capital loss to the extent of any long-term capital gain dividends received by
such stockholder. If either Common Stock or Preferred Stock is sold after a
record date but before a payment date for declared dividends on such stock, a
stockholder will nonetheless be required to include such dividend in income in
accordance with the rules above for distributions, whether or not such dividend
is required to be paid over to the purchaser.
The Company also maintains a Dividend Reinvestment and Stock Purchase Plan
(the "DRP" or "Plan"). DRP Participants will generally be treated as having
received a dividend distribution equal to the fair market value on the
Investment Date (as defined in the Plan) of the Plan Shares that are purchased
with the Participant's reinvested dividends and/or optional cash payments on
such date, plus the brokerage commissions, if any, allocable to the purchase of
such shares, and participants will have a tax basis in the shares equal to such
value. DRP Participants may not, however, receive any cash with which to pay the
resulting tax liability. Shares received pursuant to the DRP will have a holding
period beginning on the day after their purchase by the Plan Administrator.
The Company is required under Treasury Department regulations to demand
annual written statements from the record holders of designated percentages of
its Capital Stock disclosing the actual and constructive ownership of such stock
and to maintain permanent records showing the information it has received as to
the actual and constructive ownership of such stock and a list of those persons
failing or refusing to comply with such demand.
11
TAXATION OF TAX-EXEMPT ENTITIES
The Company does not expect to incur excess inclusion income and,
therefore, does not prohibit tax-exempt entities or "disqualified organizations"
from investing in its Securities. In general, a tax-exempt entity that is a
holder of the Company's Securities will not be subject to tax on distribution.
The Company does not intend to issue debt obligations with different
maturities secured by a single pool of Mortgage Assets and does not expect to
create or acquire taxable mortgage pools that can generate excess inclusion
income. In addition, the Company does not intend to create or acquire REMIC
residual interests that can generate excess inclusion income.
EXERCISE OF SECURITIES WARRANTS
Upon a holder's exercise of a Securities Warrant, the holder will, in
general, (i) not recognize any income, gain or loss for Federal income tax
purposes, (ii) receive an initial tax basis in the Security received equal to
the sum of the holder's tax basis in the exercised Securities Warrant and the
exercise price paid for such Security and (iii) have a holding period for the
Security received beginning on the date of exercise.
SALE OR EXPIRATION OF SECURITIES WARRANTS
If a holder of a Securities Warrant sells or otherwise disposes of such
Securities Warrant (other than by its exercise), the holder generally will
recognize capital gain or loss (long-term capital gain or loss if the holder's
holding period for the Securities Warrant exceeds twelve months on the date of
disposition; otherwise, short-term capital gain or loss) equal to the difference
between (i) the cash and fair market value of other property received, and (ii)
the holder's tax basis (on the date of disposition) in the Securities Warrant
sold. Such a holder generally will recognize a capital loss upon the expiration
of an unexercised Securities Warrant equal to the holder's tax basis in the
Securities Warrant on the expiration date.
TAXATION OF STOCKHOLDER RIGHTS
If the Company makes a distribution of Stockholder Rights ("Rights") with
respect to its Common Stock, such distribution generally will be tax-free and a
Stockholder's basis in the Rights received in such distribution will be zero. If
the fair market value of the Rights on the date of issuance is 15% or more of
the value of the Common Stock or, if the Stockholder so elects regardless of the
value of the Rights, the Stockholder will make an allocation between the
relative fair market values of the Rights and the Common Stock on the date of
issuance of the Rights. On exercise of the Rights, the Stockholder will
generally not recognize gain or loss. The Stockholder's basis in the shares
received from the exercise of the Rights will be the amount paid for the shares
plus the basis, if any, of the Rights exercised. Distribution of Rights with
respect to other classes of Securities holders generally would be taxable.
FOREIGN INVESTORS
In general, foreign investors will be subject to special withholding tax
requirements on income and capital gains distributions attributable to their
ownership of the Company's Securities subject to reduction pursuant to an
applicable income tax treaty.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters or
dealers for public offering and sale, to one or more investors directly or
through agents, to existing holders of its Securities directly through the
issuance of Stockholders Rights as a dividend, or through any combination of
these methods of sale. Any such underwriter or agent involved in the offer and
sale of the Securities will be named in the applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such
12
prevailing market prices, or at negotiated prices (any of which may represent a
discount from the prevailing market prices). The Company may also sell its
Securities from time to time through one or more agents in ordinary brokers'
transactions on Nasdaq or a national securities exchange. Such sales may be
effected during a series of one or more pricing periods at prices related to the
prevailing market prices reported on Nasdaq or a national securities exchange,
as shall be set forth in the applicable Prospectus Supplement.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities, for whom
they may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concession or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
Securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from the Company and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each class
or series of Securities will be a new issue with no established trading market,
other than the Common Stock which is currently listed on Nasdaq. Any shares of
Common Stock sold pursuant to a Prospectus Supplement will also be listed on the
Nasdaq or a national securities exchange, subject to official notice of
issuance. The Company may elect to list any future class or series of Securities
on Nasdaq or another exchange, but is not obligated to do so. It is possible
that one or more underwriters may make a market in a future class or series of
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
Under agreements into which the Company may enter, underwriters, dealers
and agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act. Underwriters, dealers and agents may
engage in transactions with or perform services for the Company in the ordinary
course of business.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at regular intervals over a fixed period of time pursuant to negotiated
subscription commitments. Institutions with which such subscription commitments
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and others,
but in all cases such institutions must be approved by the Company. The
obligations of any purchaser under any such subscription commitments will be
subject to certain conditions, including that the purchase of the Securities
shall not be prohibited under the laws of the jurisdiction to which such
purchaser is subject, as well as to the specific terms and conditions negotiated
that will be set forth in the applicable Prospectus Supplement. The underwriters
and such other agents will not have any responsibility in respect of the
validity or performance of such subscription commitments.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
13
ERISA INVESTORS
Because the Common Stock will qualify as a "publicly offered security,"
employee benefit plans and Individual Retirement Accounts may purchase shares of
Common Stock and treat such shares, and not the Company's assets, as plan assets
The status of Securities offered hereby other than the Common Stock will be
discussed in the relevant Prospectus Supplement. Fiduciaries of ERISA plans
should consider (i) whether an investment in the Common Stock and other
Securities offered hereby satisfies ERISA diversification requirements, (ii)
whether the investment is in accordance with the ERISA plan's governing
instruments and (iii) whether the investment is prudent.
LEGAL MATTERS
The validity of the Securities offered hereby and certain legal matters
will be passed on for the Company by Tobin & Tobin, a professional corporation,
San Francisco, California. Certain tax matters will be passed on by Giancarlo &
Gnazzo, A Professional Corporation, San Francisco, California. Tobin & Tobin and
Giancarlo & Gnazzo, A Professional Corporation, will rely as to all matters of
Maryland law upon the opinion of Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The Balance Sheets as of December 31, 1996 and 1995 and the Statements of
Operations, Stockholders' Equity and Cash Flows for the years ended December 31,
1996 and 1995 and for the period from August 19, 1994 (Commencement of
Operations) to December 31, 1994 incorporated by reference in this Prospectus
have been included therein in reliance on the report of Coopers & Lybrand,
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
14
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES, NOR SHALL ANY SALES OF THE SECURITIES BE
MADE PURSUANT TO THIS PROSPECTUS, IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION OR SALE IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information................. 2
Incorporation of Certain Information
by Reference........................ 2
The Company........................... 4
Use of Proceeds....................... 4
Description of Securities............. 4
Certain Federal Income Tax
Considerations...................... 10
Plan of Distribution.................. 12
ERISA Investors....................... 14
Legal Matters......................... 14
Experts............................... 14
======================================================
======================================================
$300,000,000
RWT
REDWOOD TRUST, INC.
(COMMON STOCK, PREFERRED STOCK, WARRANTS, AND
SHAREHOLDER RIGHTS TO PURCHASE COMMON STOCK
AND PREFERRED STOCK)
------------------------
PROSPECTUS
------------------------
APRIL , 1997
======================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance and
distribution of the securities being registered are as set forth below. All such
expenses, except for the SEC registration and filing fees, are estimated:
SEC Registration................................................ $ 90,909.09
Legal Fees and Expenses......................................... $ 20,000.00
Accounting Fees and Expenses.................................... $ 5,000.00
Printing and Engraving Fees..................................... $ 10,000.00
Miscellaneous................................................... $ 4,090.91
-----------
Total................................................. $130,000.00
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 2-418 of the Corporations and Associations Article of the Annotated
Code of Maryland provides that a Maryland corporation may indemnify any director
of the corporation and any person who, while a director of the corporation, is
or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise or employee benefit plan,
is made a party to any proceeding by reason of service in that capacity unless
it is established that the act or omission of the director was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty; or the director actually received an
improper personal benefit in money, property or services; or, in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding, but if the proceeding was one by or in the right
of the corporation, indemnification may not be made in respect of any proceeding
in which the director shall have been adjudged to be liable to the corporation.
Such indemnification may not be made unless authorized for a specific proceeding
after a determination has been made, in the manner prescribed by the law, that
indemnification is permissible in the circumstances because the director has met
the applicable standard of conduct. On the other hand, the director must be
indemnified for expenses if he has been successful in the defense of the
proceeding or as otherwise ordered by a court. The law also prescribes the
circumstances under which the corporation may advance expenses to, or obtain
insurance or similar protection for, directors.
The law also provides for comparable indemnification for corporate officers
and agents.
The Registrant's Articles of Incorporation provide that its directors and
officers shall, and its agents in the discretion of the Board of Directors may,
be indemnified to the fullest extent required or permitted from time to time by
the laws of Maryland.
The Maryland GCL permits the charter of a Maryland corporation to include a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except to the extent that (i)
it is proved that the person actually received an improper benefit or profit in
money, property or services for the amount of the benefit or profit in money,
property or services actually received, or (ii) a judgment or other final
adjudication is entered in a proceeding based on a finding that the person's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the proceeding. The
Company's Articles of Incorporation contain a provision providing for
elimination of the liability of its directors and officers to the Company or its
stockholders for money damages to the maximum extent permitted by Maryland law
from time to time.
II-1
The form of underwriting agreement included as Exhibit 1.1 to the
Registration Statement, provides for indemnification of the Registrant, its
directors and certain of its officers against certain liabilities, including
liabilities under the Securities Act.
ITEM 16. EXHIBITS. *
1.1 Form of underwriting agreement, including forms of opinions related thereto
5.1 Opinion of Tobin & Tobin, a professional corporation, as to legality (including
consent of such firm)
5.2 Opinion of Piper & Marbury L.L.P. as to legality (including consent of such
firm)
8.1 Opinion of Giancarlo & Gnazzo, A Professional Corporation, as to certain tax
matters (including consent of such firm)
23.1 Consent of Tobin & Tobin (included in Exhibit 5.1)
23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.2)
23.3 Consent of Giancarlo & Gnazzo, A Professional Corporation (included in Exhibit
8.1)
23.4 Consent of Coopers & Lybrand, L.L.P., independent accountants.
24.1 Power of Attorney (set forth on signature page)
- ---------------
* Definitive exhibits with respect to specific issuances of Securities (other
than shares of Common Stock issued pursuant to an underwriting agreement
substantially in the form of Exhibit 1.1) covered by this Registration
Statement will be filed by amendment or incorporated by reference from reports
filed by the Company pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, at the time of issuance.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in the periodic reports filed by
the Registrant pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of Prospectus filed as part of this
II-2
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective; and (2) for the purpose of
determining any liability under the Securities Act of 1933, each post-effective
amendment that contains a form of Prospectus shall be deemed to be a new
Registration Statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant, pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities begin registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City and County of San Francisco, State of California, on
April 21, 1997.
REDWOOD TRUST, INC.
By: /s/ GEORGE E. BULL, III
------------------------------------
George E. Bull, III
(Chairman of the Board and
Chief Executive Officer)
POWER OF ATTORNEY
We, the undersigned directors and officers of Redwood Trust, Inc., do
hereby constitute and appoint George E. Bull III, Douglas B. Hansen, Frederick
H. Borden and Vickie L. Rath our true and lawful attorneys and agents, to do any
and all acts and things in our name and behalf in our capacities as directors,
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents may deem necessary
or advisable to enable said corporation to comply with the Securities Act of
1933, as amended, and any rules, regulations and requirements of the Securities
and Exchange Commission, in connection with this registration statement,
including specifically, but without limitation, power and authority to sign for
us or any of us in our names and in the capacities indicated below, any and all
amendments (including post-effective amendments) hereof; and we do hereby ratify
and confirm all that the said attorneys and agents shall do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Form S-3
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE POSITION DATE
- ------------------------------------------ ------------------------------ -------------------
/s/ GEORGE E. BULL, III Chairman of the Board, Chief April 21, 1997
- ------------------------------------------ Executive Officer and Director
George E. Bull, III (Principal Executive Officer)
/s/ DOUGLAS B. HANSEN President, Chief Financial April 21, 1997
- ------------------------------------------ Officer and Director
Douglas B. Hansen (Principal Financial Officer)
/s/ FREDERICK H. BORDEN Vice Chairman of the Board, April 21, 1997
- ------------------------------------------ Secretary and Director
Frederick H. Borden
/s/ VICKIE L. RATH Vice-President, Treasurer and April 21, 1997
- ------------------------------------------ Controller (Principal
Vickie L. Rath Accounting Officer)
/s/ DAN A. EMMETT Director April 21, 1997
- ------------------------------------------
Dan A. Emmett
II-4
SIGNATURE POSITION DATE
- ------------------------------------------ ------------------------------ -------------------
/s/ THOMAS F. FARB Director April 21, 1997
- ------------------------------------------
Thomas F. Farb
/s/ NELLO GONFIANTINI Director April 21, 1997
- ------------------------------------------
Nello Gonfiantini
/s/ CHARLES J. TOENISKOETTER Director April 21, 1997
- ------------------------------------------
Charles J. Toeniskoetter
II-5
EXHIBIT INDEX*
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ------ ----------------------------------------------------------------------------- ------
1.1 Form of underwriting agreement, including forms of opinions related
thereto......................................................................
5.1 Opinion of Tobin and Tobin, a professional corporation, as to legality
(including consent of such firm).............................................
5.2 Opinion of Piper & Marbury L.L.P., as to legality (including consent of such
firm)........................................................................
8.1 Opinion of Giancarlo & Gnazzo, A Professional Corporation, as to certain tax
matters (including consent of such firm).....................................
23.1 Consent of Tobin & Tobin, a professional corporation (included in Exhibit
5.1).........................................................................
23.2 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.2)..................
23.3 Consent of Giancarlo & Gnazzo, A Professional Corporation (included in
Exhibit 8.1).................................................................
23.4 Consent of Coopers & Lybrand, L.L.P., independent accountants................
24.1 Power of Attorney (set forth on signature page)..............................
- ---------------
* Definitive exhibits with respect to specific issues of Securities (other than
shares of Common Stock issued pursuant to an underwriting agreement
substantially in the form of Exhibit 1.1) covered by this Registration
Statement will be filed by amendment or incorporated by reference from reports
filed by the Company pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, at the time of issuance.