<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 18, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONTINENTAL MORTGAGE AND EQUITY TRUST
(Exact name of Registrant as specified in its Charter)
<TABLE>
<C> <C>
CALIFORNIA 94-2738844
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
(214) 692-4700
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
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ROBERT A. WALDMAN
CONTINENTAL MORTGAGE AND EQUITY TRUST
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
(214) 692-4700
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
---------------------
The Commission is requested to send copies of all communications to:
<TABLE>
<C> <C>
THOMAS R. POPPLEWELL ROBERT A. WALDMAN
Andrews & Kurth L.L.P. Continental Mortgage and Equity Trust
1717 Main Street 10670 North Central Expressway
Suite 3700 Suite 300
Dallas, Texas 75201 Dallas, Texas 75231
(214) 659-4480 (214) 692-4700
</TABLE>
Approximate date of commencement of proposed sale to the public: FROM TIME
TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT PURSUANT TO RULE
415.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [X]
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
reinvestment plans, please check the following box. [ ]
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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest, no par
value.................................. 150,000 Shares $17.625(1) $2,643,750(1) $801.14
======================================================================================================================
</TABLE>
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the
amount of the registration fee, based on the average of the high and low
sales prices of the Shares, as reported on the Nasdaq Stock Market on
November 14, 1997.
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<PAGE> 2
PROSPECTUS
CONTINENTAL MORTGAGE AND EQUITY TRUST
DIVIDEND REINVESTMENT PLAN
Continental Mortgage and Equity Trust, a California business trust (the
"Company"), hereby offers participation in its Dividend Reinvestment Plan (the
"Plan"). The Plan provides holders of shares of beneficial interest of the
Company ("Shares") with a convenient and economical method of reinvesting all or
a portion of their cash dividends in additional Shares, in most cases at a
discount to the market price.
The Plan allows holders of Shares to automatically reinvest cash dividends
on all or a portion of their Shares. Shares will be purchased under the Plan
from the Company. The purchase price of the Shares so purchased may reflect a
discount (ranging from 0% to 5%) from the market price.
American Stock Transfer and Trust Company (the "Agent") will act as agent
for the participants in the Plan. The Agent will receive all of the cash
dividends paid on participants' Shares and will use such dividends to acquire
Shares directly from the Company for the accounts of such participants.
Any participant in the Plan may withdraw at any time. Shareholders who do
not choose to participate in the Plan will continue to receive cash dividends,
as declared, in the usual manner.
This Prospectus relates to 150,000 Shares of the Company. The Shares of the
Company are quoted on the Nasdaq Stock Market. On November 14, 1997, the last
sales price for the Shares as reported on the Nasdaq Stock Market was $16.75 per
Share.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER 18, 1997.
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act of 1933, as
amended (the "Securities Act") with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in such
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
such Registration Statement and to the exhibits thereto. Statements contained
herein concerning the provisions of certain documents are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto may be inspected without
charge at the office of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, and copies thereof may be obtained from the Commission upon payment of
the prescribed fees.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Commission. Reports and
proxy and information statements filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act 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 following regional
offices of the Commission: New York Regional Office, 7 World Trade Center, 13th
Floor, New York, New York 10048; and Chicago Regional Office, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission also
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 such Web site is
"http://www.sec.gov".
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Current Report on Form 8-K dated December 13, 1996,
as filed with the Commission on January 3, 1997, as amended by the
Company's Form 8-K/A, as filed with the Commission on February 11, 1997 and
by the Company's Form 8-K/A, as filed with the Commission on March 11,
1997.
2. The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, as filed with the Commission on March 14, 1997.
3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997, as filed with the Commission on May 7, 1997.
4. The Company's Current Report on Form 8-K dated June 24, 1997, as
filed with the Commission on July 9, 1997.
5. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997, as filed with the Commission on August 8, 1997.
6. The Company's Current Report on Form 8-K dated July 18, 1997, as
filed with the Commission on August 19, 1997.
7. The Company's Current Report on Form 8-K dated August 18, 1997, as
filed with the Commission on October 14, 1997.
8. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1997, as filed with the Commission on November 5, 1997.
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<PAGE> 4
9. The description of the Shares contained in the Company's
Registration Statement under Section 12 of the Exchange Act and all
amendments and reports filed for the purpose of updating that description.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to termination of
the offering of the Shares to which this Prospectus relates shall be deemed to
be incorporated by reference in this Prospectus and shall be part hereof from
the date of filing of such document. Any statement contained in a document that
is deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that is also deemed
to be incorporated by reference herein modifies or supersedes such statement,
and any statement contained in this Prospectus shall be deemed to be modified or
superseded to the extent that a statement contained in any subsequently filed
document that also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus. The Company will provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described
above (other than exhibits). Requests for such copies should be directed to
Continental Mortgage and Equity Trust, 10670 North Central Expressway, Suite
300, Dallas, Texas 75231, Attention: Investor Relations. The Company's telephone
number is (214) 692-4700.
THE COMPANY
The Company is a California business trust organized pursuant to a
declaration of trust dated August 27, 1980, and amended and restated as of May
27, 1987. The Company commenced operations on December 3, 1980. The Company
invests in equity interests in real estate through direct acquisitions and
partnerships and financing real estate and real estate related activities
through investments in mortgage loans.
Although the Company's board of trustees is directly responsible for
managing the affairs of the Company and for setting the policies which guide it,
the day-to-day operations of the Company are performed by Basic Capital
Management, Inc. ("BCM"). BCM is a contractual advisor under the supervision of
the Company's board of trustees. The duties of BCM include, among other things,
locating, investigating, evaluating and recommending real estate and mortgage
note investment and sales opportunities, as well as financing and refinancing
sources for the Company. BCM also serves as a consultant in connection with the
Company's business plan and investment policy decisions made by the Company's
board of trustees.
BCM is a company owned by a trust for the benefit of the children of Gene
E. Phillips. Gene Phillips served as a trustee of the Company until December 31,
1992. Mr. Phillips also served as a director of BCM until December 22, 1989 and
as Chief Executive Officer of BCM until September 1, 1992. Mr. Phillips
currently serves as a representative of the trust for the benefit of his
children that owns BCM and, in such capacity, has substantial contact with the
management of BCM and input with respect to BCM's performance of advisory
services to the Company. BCM has been providing advisory services to the Company
since March 28, 1989. Renewal of BCM's advisory agreement with the Company was
approved at the annual meeting of the Company's shareholders held on May 8,
1997. BCM also serves as advisor to Income Opportunity Realty Investors, Inc.
("IORI") and Transcontinental Realty Investors, Inc. ("TCI"). The trustees of
the Company are also directors of IORI and TCI and the executive officers of the
Company are also executive officers of IORI and TCI. Mr. Phillips is a general
partner of Syntek Asset Management, L.P. ("SAMLP"), the general partner of
National Realty, L.P. ("NRLP") and National Operating, L.P. ("NOLP"), the
operating partnership of NRLP. BCM performs certain administrative functions for
NRLP and NOLP on a cost-reimbursement basis. BCM also serves as advisor to
American Realty Trust, Inc. ("ART"). Mr. Phillips served as a director and
Chairman of the Board of ART until November 16, 1992. Randall M. Paulson,
President of the Company, also serves as the President of BCM, IORI and TCI,
Executive Vice President of ART and President and sole director of Syntek Asset
Management, Inc. ("SAMI"), which is the managing general partner of SAMLP. The
executive officers of the Company are also executive officers of ART. As of
September 19, 1997 ART and BCM owned approximately 40.6% and
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<PAGE> 5
13.8%, respectively, of the Company's outstanding Shares and BCM and the Company
owned approximately 43.9% and 6.8%, respectively, of ART's outstanding shares of
common stock.
Since February 1, 1990, affiliates of BCM have provided property management
services to the Company. Currently, Carmel Realty Services, Ltd. ("Carmel,
Ltd.") provides such property management services. Carmel, Ltd. subcontracts
with other entities for the provision of the property-level management services
to the Company. The general partner of Carmel, Ltd. is BCM. The limited partners
of Carmel, Ltd. are (i) First Equity Properties, Inc., ("First Equity") which is
50% owned by BCM, (ii) Gene Phillips and (iii) a trust for the benefit of the
children of Gene Phillips. Carmel, Ltd. subcontracts the property-level
management of the Company's commercial properties and the industrial warehouses
owned by a real estate partnership in which the Company is a partner to Carmel
Realty, Inc. ("Carmel Realty"), which is a company owned by First Equity. Carmel
Realty is entitled to receive property and construction management fees and
leasing commissions in accordance with the terms of its property-level
management agreement with Carmel, Ltd.
Carmel Realty is also entitled to receive real estate brokerage commissions
in accordance with the terms of a nonexclusive brokerage agreement with the
Company.
The Company has no employees. Employees of BCM render services to the
Company.
The Company's principal offices are located at 10670 North Central
Expressway, Suite 300, Dallas, Texas 75231. The Company's telephone number is
(214) 692-4700.
USE OF PROCEEDS
The Company has no basis for estimating either the number of Shares, if
any, that will ultimately be purchased from the Company under the Plan or the
prices at which such Shares will be sold. Proceeds from the Shares purchased
from the Company will be used for general corporate purposes.
DESCRIPTION OF THE DIVIDEND REINVESTMENT PLAN
The Company is offering the holders of its Shares the opportunity to
purchase additional Shares through the Plan. The following is a numbered
question-and-answer format describing the provisions of the Plan. This
description constitutes the full terms of the Plan.
PURPOSE
1. What is the purpose of the Plan?
The purpose of the Plan is to provide the Company's shareholders with a
convenient method of investing cash dividends in additional Shares without
payment of brokerage commissions or service charges. Because the Shares
purchased under the Plan will be acquired from the Company, the Plan will
provide the Company with additional equity capital that will be available for
general corporate purposes.
ADVANTAGES
2. What are the advantages of investment in the Plan?
The Plan conveniently allows the participant to purchase additional Shares
through automatic reinvestment of Share dividends into additional Shares. The
participant pays no commission or service charge in connection with the
purchases of Shares under the Plan. Full investment of the participant's funds
is possible because the Plan permits fractions of Shares, as well as full
Shares, to be credited to the participant's account. Additionally, the Company
provides a statement of account as soon as practicable after each investment,
simplifying the participant's record-keeping. The Plan's safekeeping feature
also protects the participant against the loss, theft or destruction of
certificates through the retention of Shares purchased through the Plan ("Plan
Shares").
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<PAGE> 6
ADMINISTRATION
3. Who administers the Plan for participants?
American Stock Transfer & Trust Company (the "Agent"), or such other trust
company or bank as the Company may from time to time designate as agent for the
participants, administers the Plan and, in such capacity, purchases all Shares
for the participants, keeps a continuing record of participants' accounts, sends
statements of account to participants and performs for participants other duties
relating to the Plan. Shares purchased under the Plan will be registered in the
name of the Agent or the nominee of the Agent for participants in the Plan. As
record holder of the Shares held in participants' accounts under the Plan, the
Agent will receive dividends on all Shares held in the Plan on each respective
dividend record date, will credit such dividends to participants' accounts on
the basis of full and fractional Shares held in such accounts, and will
automatically reinvest such dividends in additional Shares.
All communications regarding the Plan should be sent to the Agent at the
following address:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
The Agent may also be contacted by telephone toll free at (800) 278-4353.
PARTICIPATION
4. Who is eligible to participate in the Plan?
All record holders of Shares are eligible to participate in the Plan.
Participation is entirely voluntary and may be discontinued at any time. A
record holder may participate in the Plan with respect to all or any portion of
the Shares registered in his or her name. To be eligible to participate in the
Plan, a beneficial owner whose shares are held in a name other than his or her
own (e.g., in the name of a broker or bank nominee) must either (i) become a
holder of record by having such Shares transferred into his or her name, or (ii)
make appropriate arrangements with his or her nominee to participate on behalf
of the beneficial owner. The Company reserves the right to refuse to permit a
broker, bank nominee or other record holder to participate in the Plan if the
terms of such participation would, in the Company's judgment, result in
excessive cost or burden on the Company. NEITHER THE AGENT NOR THE COMPANY WILL
BE RESPONSIBLE, HOWEVER, FOR THE MAINTENANCE OF THE INDIVIDUAL ACCOUNTS OF ANY
BROKER OR NOMINEE WHO ELECTS TO PARTICIPATE NOR WILL IT BE RESPONSIBLE FOR ANY
FEES CHARGED BY SUCH BROKER OR NOMINEE IN THE PERFORMANCE OF ITS DUTIES ON
BEHALF OF SUCH BENEFICIAL OWNERS. THE COMPANY MAY REFUSE PARTICIPATION IN THE
PLAN TO HOLDERS OF SHARES RESIDING IN STATES WHOSE SECURITIES LAWS DO NOT EXEMPT
OFFERS AND SALES PURSUANT TO THE PLAN FROM REGISTRATION.
5. How does an eligible shareholder participate?
A shareholder whose Shares are registered in such shareholder's own name
may become a participant in the Plan by execution and delivery to the Agent of
an Enrollment Authorization Card. An Enrollment Authorization Card will be
provided from time to time by mail to each shareholder of record and will also
be furnished at any time upon written or oral request to the Agent. If Shares
are registered in more than one name (e.g., joint tenants, trustees, etc.), all
registered owners must sign the Enrollment Authorization Card exactly as such
Shares are registered.
SHAREHOLDERS WHOSE SHARES ARE HELD IN A NAME OTHER THAN THEIR OWN SHOULD
CONSULT THEIR BROKER OR NOMINEE TO DETERMINE WHETHER THEY MAY PARTICIPATE AND,
IF SO, HOW AND WHETHER ANY FEES WILL BE CHARGED BY THE BROKER OR NOMINEE IN
CONNECTION WITH SUCH PARTICIPATION.
6. When may a shareholder join the Plan?
An eligible shareholder may join the Plan at any time. Participation will
begin with the next dividend payable following receipt by the Agent of the
Enrollment Authorization Card unless there is insufficient time
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to process the participant's enrollment prior to the payment of such dividend,
in which case participation will begin with the next following dividend payment.
7. What does the Enrollment Authorization Card provide?
The Enrollment Authorization Card directs the Agent to apply all of the
participant's cash dividends on
(i) the number of Shares held by the participant on the applicable
record date and designated to be included in the Plan, and
(ii) all whole and fractional Shares that have been credited to a
participant's Plan account through the reinvestment of dividends,
toward the purchase of additional Shares.
8. How may a participant change investment options under the Plan?
A participant's investment options under the Plan may be changed by
completion and delivery to the Agent of a new Enrollment Authorization Card.
Changes will be effective with the next dividend payable following receipt by
the Agent of the Enrollment Authorization Card unless there is insufficient time
to process the change prior to the payment of such dividend, in which case the
change will be effective with the next following dividend payment.
PURCHASES
9. What will be the price of Shares purchased under the Plan?
The Agent will purchase Shares directly from the Company effective as of
the close of business on the applicable dividend payment date. The purchase
price of Shares purchased for the Plan directly from the Company will be the
average of the daily high and low sales prices of the Shares for the period of
five trading days ending on the dividend payment date as reported on the Nasdaq
Stock Market, less a discount (ranging from 0% to 5%) from such market price.
As of the date of this Prospectus, the discount for purchases directly from
the Company is 5%, but may be changed or eliminated by the Company without prior
notice to participants at any time. The discount on Shares issued directly by
the Company shall not exceed 5% of the closing price for the Shares as reported
on the Nasdaq Stock Market on the relevant dividend payment date.
Pending investment, all dividends shall be held in non-interest bearing
accounts maintained by the Agent.
Since purchase prices for the Shares are established on the dates of
purchase, a participant loses any advantages otherwise available from being able
to select the timing of investments. Participants should recognize that neither
the Company nor the Agent can assure a profit or protect against a loss on
Shares purchased under the Plan. Neither the Company nor the Agent will have any
liability to participants in connection with the timing of purchases, the price
at which Shares are purchased or the failure to make purchases at any time
because of applicable legal restrictions.
10. How many Shares will be purchased for participants?
The number of Shares to be purchased depends on the amount of the
participant's dividend and the price of the Shares acquired for such
participant. Each participant's account will be credited with the number of
Shares, including fractions computed to three decimal places, equal to the total
amount of the dividend invested divided by the purchase price of the Shares
acquired.
EXPENSES
11. What are the expenses to participants in the Plan?
There are no brokerage commissions related to purchases of Shares by the
Agent directly from the Company. The Company will pay the costs of
administration of the Plan, including charges by the Agent for
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bank services on each dividend reinvestment by each participant in the Plan. The
Agent may charge a participant for additional services, not provided under the
Plan, performed at a participant's request. Certain expenses will be incurred by
the participant if the participant requests that Shares be sold. See Question
15. Brokers or nominees who participate on behalf of beneficial owners for whom
they are holding Shares may charge such beneficial owners fees in connection
with such participation, for which neither the Agent nor the Company will be
responsible.
REPORTS TO PARTICIPANTS
12. What reports will be sent to participants in the Plan?
The Agent will mail to each participant in the Plan, as promptly as
practicable after each purchase of Shares for the participant's account, a
statement showing (i) dividends received on full or fractional Shares held in
such participant's account or in the name of the Plan for the account of such
participant; (ii) full and fractional Shares purchased and the purchase price of
such Shares; and (iii) the beginning and new Share balance of such participant's
account. These statements are a participant's continuing record of the cost of
such participant's purchases under the Plan and will contain the only records of
the purchase prices of Shares acquired and should be retained for income tax
purposes. The Agent may charge additional fees to participants requesting copies
of past statements. In addition, participants will receive the same information
distributed to all shareholders of Shares, including IRS information for
reporting dividends received.
Statements will not be provided directly to beneficial owners participating
in the Plan through a broker or nominee. Beneficial owners should arrange to
receive such information directly from their broker or nominee.
CERTIFICATES FOR SHARES
13. Will certificates be issued for Shares purchased under the Plan?
Normally, certificates for Shares purchased under the Plan will not be
issued to participants until the participant withdraws from the Plan. The Agent
will maintain an account for each participant in the Plan. Whole and fractional
Shares purchased on behalf of the participants by the Agent pursuant to the Plan
will be credited to the participants' accounts as "unissued certificate" Shares.
No Share certificate will be issued to participants for Shares credited to their
accounts unless the participant requests otherwise. Such requests must be made
in writing to the Agent. Certificates will be issued to participants with
respect to full Shares only. Issuance of such certificates will not terminate
the participant's participation in the Plan.
Shares credited to the account of a participant under the Plan may not be
pledged as collateral. A participant who wishes to pledge such Shares must
request that certificates for such Shares be issued in the participant's name.
Certificates for fractions of Shares will not be issued under any
circumstances. The Company and the Agent, at their discretion, may terminate any
account which contains only a fraction of a Share by paying the account holder
the dollar value of such fractional Share.
14. In whose name will certificates be registered when issued?
Certificates for whole Shares issued upon the request of participants will
be registered in the names in which such participants' accounts are maintained
at the time of such request. For holders of record, this generally will be in
the name in which your Share certificates are registered at the time you enroll
in the Plan. Upon request, Shares will be registered in any other name upon the
presentation to the Agent of evidence of compliance with all applicable transfer
requirements (including the payment of any applicable transfer taxes).
WITHDRAWAL
15. How does a participant withdraw from the Plan?
Participants may discontinue their participation with respect to some or
all of their Shares enrolled in the Plan at any time upon written notice to the
Agent specifying the number of whole Shares to be withdrawn
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from the Plan. To be effective for any dividend payment, such notice must be
received by the Agent in sufficient time to process such notice of withdrawal
prior to payment of such dividend. In the event of insufficient time to process
such notice of withdrawal, the participant's account will be terminated after
dividends paid for such period have been credited to the participant's account
and invested pursuant to the Plan.
As soon as practicable after the effective date of a participant's
withdrawal, the Agent will send to the participant certificates, registered in
the name of such participant, for the number of whole Shares in the
participant's account and a cash payment for any fraction of a Share. Such cash
payment will be based on the then current market value of the Shares, less a
$10.00 liquidation fee. All subsequent dividends will be paid in cash by check
sent to the shareholder unless the shareholder elects to re-enroll in the Plan.
In connection with the withdrawal of Shares from the Plan, a participant
may request that all or a part of the whole Shares to be withdrawn be sold. A
request to sell Shares must be in writing delivered to the Agent. If a
participant requests such sale, the Agent will use its best efforts to make the
sale for the participant's account in brokerage transactions regular way on a
national securities exchange within five business days after receipt of the
participant's request. The participant will receive the proceeds from such sale,
less any brokerage fees or commissions, service charges, transfer taxes and
other costs of sale and less a $10.00 liquidation fee. A participant requesting
such sale should be aware that the price of Shares may fall during the period
between a request for sale, its receipt by the Agent, and the ultimate sale in
the open market. This risk should be evaluated, and will be borne solely, by the
participant. No redemption check will be mailed prior to settlement of funds
from the brokerage firm through which the sale is executed, which settlement is
normally three business days after the sale of the Shares.
In the event of the death or incompetence of a participant, the Agent shall
withdraw the participant from the Plan after receipt of satisfactory written
notice of such event and satisfactory proof of appointment of a legal
representative and of such legal representative's right to receive shares or
payments from the participant's account. The death or incompetence of a
participant shall not otherwise constitute termination of participation or
withdrawal from the Plan.
MODIFICATION OR TERMINATION
16. May the Company modify or terminate the Plan or terminate a participant's
participation?
The Company reserves the right to modify the Plan at any time. All
participants will be sent notice of any such modification, which shall be deemed
conclusively accepted by each participant except those participants from whom
the Agent receives written notice to discontinue participation prior to the
effective date thereof. The Company may terminate the Plan for any reason at any
time, upon written notice mailed to all participants at the addresses shown on
their accounts; provided that no such termination shall be made on or after a
record date for payment of a dividend until after the corresponding dividend
payment date and investment of such dividend payment in accordance with the
terms of the Plan, unless the Company pays to such participants in cash the
dividend that would have been payable on the Shares in each such participant's
account on such record date. Upon any such termination, the Agent will send
promptly to each such participant a certificate, registered in the name of such
participant, for the number of whole Shares held in the account of such
participant, to the registered address of such participant. Any fractional
Shares will be liquidated at the then current market price on the date the
Shares are sold, with the net proceeds thereof to be sent to such participants
by check.
Notwithstanding anything to the contrary set forth herein, the Company has
the right to modify, amend or terminate the Plan at any time without notice if
necessary to preserve the Company's status as a real estate investment trust.
The Company reserves the right (in its sole discretion) to terminate a
participant's participation in, or exclude any person from participation in, the
Plan.
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OTHER INFORMATION
17. What happens when a participant sells or transfers all of the Shares
registered in the participant's name?
If a participant ceases to be a shareholder of record, the Agent will
continue to reinvest the dividends on the Shares held for the participant in the
Plan until otherwise notified.
18. What happens if the Company issues a share dividend or declares a share
split or has a rights offering?
Shares distributed either as a result of a share dividend or a split on
Shares enrolled in the Plan and held by the Agent for participants will be
credited to the participants' accounts.
In the event that the Company makes available to its holders of Shares
rights to purchase additional Shares or other securities, the Shares held for
each participant under the Plan will be added to other Shares held by each such
participant in calculating the number of rights to be issued to each such
participant.
19. How will a participant's Shares be voted at meetings of holders of Shares?
Each participant will receive a proxy for the total number of Shares (i)
credited to such participant's Plan account and (ii) held of record by such
participant and not enrolled in the Plan. Participants may vote all of their
Shares in person or by proxy.
20. What are the federal income tax consequences of participation in the Plan?
The federal income tax consequences that might occur as a result of
participation in the Plan are not well established. Therefore, participants are
advised to consult their tax advisors with respect to tax implications that may
be applicable to their specific situations. Based upon published Internal
Revenue Service rulings and private Internal Revenue Service rulings issued to
other companies, and other factors with respect to similar plans and
circumstances, the following tax implications should occur as a result of
participation in the Plan:
(1) Dividends reinvested in additional Shares purchased directly from
the Company will be treated for federal income tax purposes as having been
received in the form of a cash distribution in an amount described in (2)
below. To the extent the Company has earnings and profits for federal
income tax purposes, the distribution will be treated as a taxable
dividend. The amount of the distribution should not be increased as a
result of the Company's payment of administrative fees or other expenses of
the Plan. However, should it be determined by the Internal Revenue Service
that the Company's payment of such administrative expenses increases the
amount of the distribution, the amount includable in income would be
deductible as an expense incurred for the production of income by
corporations and individuals who itemize deductions (subject to the two
percent of adjusted gross income limitation under the Tax Reform Act of
1986). Participants who do not itemize may be liable for additional taxes
including interest on any amount due to the government.
(2) For Shares purchased from the Company with reinvested dividends,
the taxable amount of the dividends and the tax basis of the Shares
normally will be the fair market value of the Shares on the dividend
payment date.
(3) The holding period of Shares acquired directly from the Company
will begin the day after such Shares are credited to the participant's
account, which in no event will be earlier than the dividend payment date.
(4) A participant will not realize any taxable income when he or she
receives certificates for whole Shares credited to his or her account under
the Plan, either upon his or her request for certificates or upon
withdrawal from or termination of the Plan. However, a participant who
receives, upon withdrawal from or termination of the Plan, a cash
adjustment from a fractional Share credited to his or her account may
realize a gain or loss (which, for most participants, should be capital
gain or loss) in respect of such cash adjustment. Gain or loss may also be
realized by a participant when whole Shares are sold either by the Agent
upon the participant's request or by the participant after withdrawal from
the Plan. The amount of
9
<PAGE> 11
such gain or loss will be the difference between the amount the participant
receives for his or her Shares or fractional Share and his or her tax basis
thereof.
Under Section 3406(a)(1) of the Internal Revenue Code, the Company is
required to withhold for United States income tax purposes 31% of all dividend
payments to a holder of Shares of the Company if (i) such holder has failed to
furnish to the Company such participant's taxpayer identification number
("TIN"), which for an individual is such individual's social security number,
(ii) the Internal Revenue Service has notified the Company that the TIN
furnished by the shareholder is incorrect, (iii) the Internal Revenue Service
notifies the Company that back-up withholding should be commenced because the
shareholder has failed to properly report interest or dividends or (iv) the
shareholder has failed to certify, under penalties of perjury, that such
shareholder is not subject to back-up withholding.
If a participant is a foreign shareholder whose dividends are subject to
United States income tax withholding, the amount of dividends to be reinvested
will be determined after deducting the withholding tax.
Statements of account will be sent to each participant in the Plan as
promptly as practicable after each purchase of Shares for such participant's
account. Copies of required Internal Revenue Service Form 1099, or Form 1042s
for foreign shareholders, will be sent to participants showing reportable
dividends and/or tax withheld. These statements of account and copies of
Internal Revenue Service forms should be retained for tax purposes. The
statements of account are the only record of purchase prices for Shares acquired
through the Plan and will be required to establish the tax basis of such Shares
when sold.
The tax consequences under state and local tax laws will vary from
jurisdiction to jurisdiction. Participants should consult their own tax advisors
to determine the particular tax consequences which may result from participation
in the Plan and subsequent disposal of Shares purchased pursuant to the Plan.
The Company believes the foregoing is an accurate summary of the tax
consequences of participation in the Plan as of the date of this Prospectus, but
participants should consult with their own tax advisors for advice applicable to
their particular situation.
21. What are the responsibilities of the Company and the Agent under the Plan?
Neither the Company nor the Agent will be liable in administering the Plan
for any act done in good faith, or for any good-faith omission to act,
including, without limitation, any claims of liability (i) arising out of
failure to terminate a participant's account upon such participant's death or
adjudication of incompetence prior to receipt of satisfactory written notice of
such death or incompetence as described in Question 15, (ii) with respect to the
prices at which shares are purchased or sold for a participant's account or the
times when such purchases or sales are made, or (iii) with respect to any
fluctuation in the market value prior to or after purchase or sale of Shares.
Government regulation or other circumstances may require the temporary
curtailment or suspension of purchases under the Plan. Neither the Company nor
the Agent will have any liability in connection with any inability to purchase
or sell Shares under the Plan.
22. Does participation in the Plan involve any risk?
The risk to participants is the same as with any other investment in
Shares. A participant may lose an advantage otherwise available from being able
to select more specifically the timing of investment in or sale of the Shares.
Participants must recognize that neither the Company nor the Agent can assure a
profit or protect against a loss on the Shares purchased under the Plan.
ALTHOUGH THE PLAN CONTEMPLATES THE CONTINUATION OF QUARTERLY DIVIDEND
PAYMENTS, THE PAYMENT OF FUTURE DIVIDENDS WILL DEPEND UPON FUTURE EARNINGS, THE
FINANCIAL CONDITION OF THE COMPANY AND OTHER FACTORS.
10
<PAGE> 12
23. Where are notices and other communications to participants under the Plan
sent?
Notices and other communications sent to participants under the Plan will
be addressed to the participant's last known address as reflected on the Agent's
records. Therefore, the participant should notify the Agent promptly in writing
of any change in address.
24. May the Agent resign and, if so, how is it to be replaced?
The Agent, upon thirty (30) days prior written notice to the Company, may
resign as Agent hereunder. Likewise, the Company, upon thirty (30) days prior
written notice to the Agent, may remove the Agent from its duties under the
Plan. The Company may appoint a successor agent, who shall commence to serve as
Agent hereunder upon its agreement, in writing, for the benefit of participants,
to be bound by and comply with the terms hereof.
LEGAL MATTERS
Certain legal matters with respect to the Shares offered by the Company
will be passed upon for the Company by Andrews & Kurth L.L.P.
EXPERTS
The financial statements and schedules incorporated by reference in this
Prospectus have been audited by BDO Seidman, LLP, independent certified public
accountants, to the extent and for the period set forth in their reports
incorporated herein by reference, and are incorporated herein in reliance upon
the authority of said firm as experts in auditing and accounting.
11
<PAGE> 13
======================================================
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. 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. 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 IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Incorporation of Certain Information
By Reference........................ 2
The Company........................... 3
Use of Proceeds....................... 4
Description of the Dividend
Reinvestment Plan................... 4
Legal Matters......................... 11
Experts............................... 11
</TABLE>
======================================================
======================================================
150,000 SHARES
SHARES OF BENEFICIAL INTEREST
CONTINENTAL MORTGAGE AND
EQUITY TRUST
---------------------
PROSPECTUS
---------------------
DIVIDEND REINVESTMENT PLAN
November 18, 1997
======================================================
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the amount of fees and expenses to be
incurred in connection with the issuance and distribution of the Shares offered
hereby, other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 801.14
Blue Sky Fees and Expenses.................................. 600.00
Legal Fees and Expenses..................................... 4,700.00
Accounting Fees and Expenses................................ 2,500.00
Printing and Engraving Expenses............................. 12,000.00
----------
Total............................................. $20,601.14
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS
Section 7.1 of the Second Amended and Restated Declaration of Trust of the
Company (the "Declaration of Trust") provides that no trustee, officer, employee
or agent of the Company shall be liable for obligations or contracts of the
Company or liable in tort or otherwise in connection with the affairs of the
Company, to the Company or any shareholder, trustee, officer, employee or agent
of the Company or to any other person for any action or failure to act
(including, without limitation, the failure to compel in any way any former or
acting trustee to redress any breach of trust), except only that arising from
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
Section 7.4 of the Declaration of Trust provides that any person made a
party to any action, suit or proceeding or against whom a claim or liability is
asserted by reason of the fact that he, his testator or intestate was or is a
trustee or officer, employee or agent on behalf of the Company shall be
indemnified and held harmless by the Company against judgments, fines, amounts
paid on account thereof (whether in settlement or otherwise) and reasonably
expenses, including attorneys' fees, actually and reasonably incurred in
connection with the defense of such action, suit, proceeding, claim or alleged
liability or in connection with the defense of such action, suit, proceeding,
claim or alleged liability or in connection with any appeal therein, whether or
not the same proceeds to judgment or is settled or otherwise brought to
conclusion. No such person shall be so indemnified or reimbursed for any claim,
obligation or liability which arose out of such person's willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers and controlling persons of the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
*5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the Shares being offered
*23.1 -- Consent of BDO Seidman, LLP
*23.2 -- Consent of Andrews & Kurth L.L.P. (incorporated in
Exhibit 5.1)
*24.1 -- Power of Attorney (Set forth on page II-3 of this
Registration Statement)
</TABLE>
- ---------------
* Filed herewith.
II-1
<PAGE> 15
ITEM 17. UNDERTAKINGS
(a) The undersigned Company 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 this 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 this Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section 13 or
Section 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 Company hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Company's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement 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.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to Item 15, above, or otherwise, the Company 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 Company 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 being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a 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-2
<PAGE> 16
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 of Dallas, State of Texas, on the 18th day of November,
1997.
CONTINENTAL MORTGAGE AND
EQUITY TRUST
By: /s/ RANDALL M. PAULSON
----------------------------------
Randall M. Paulson
President (Principal Executive
Officer)
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Robert
A. Waldman his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him in his name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully as to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ TED P. STOKELY Chairman of the Board and November 18, 1997
- ----------------------------------------------------- Trustee
Ted P. Stokely
/s/ RANDALL M. PAULSON President (Principal November 18, 1997
- ----------------------------------------------------- Executive Officer)
Randall M. Paulson
/s/ MARTIN L. WHITE Trustee November 18, 1997
- -----------------------------------------------------
Martin L. White
/s/ EDWARD L. TIXIER Trustee November 18, 1997
- -----------------------------------------------------
Edward L. Tixier
/s/ EDWARD G. ZAMPA Trustee November 18, 1997
- -----------------------------------------------------
Edward G. Zampa
/s/ THOMAS A. HOLLAND Executive Vice President November 18, 1997
- ----------------------------------------------------- and Chief Financial
Thomas A. Holland Officer (Principal
Accounting Officer)
</TABLE>
II-3
<PAGE> 17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
*5.1 -- Opinion of Andrews & Kurth L.L.P. as to the legality of
the Shares being offered
*23.1 -- Consent of BDO Seidman, LLP
*23.2 -- Consent of Andrews & Kurth L.L.P. (incorporated in
Exhibit 5.1)
*24.1 -- Power of Attorney (Set forth on page II-3 of this
Registration Statement)
</TABLE>
- ---------------
* Filed herewith.
<PAGE> 1
EXHIBIT 5.1
[ANDREWS & KURTH LETTERHEAD]
November 18, 1997
Continental Mortgage and Equity Trust
10670 N. Central Expressway, Suite 300
Dallas, Texas 75231
Re: Continental Mortgage and Equity Trust
Registration Statement on Form S-3
Dividend Reinvestment Plan
Ladies and Gentlemen:
We have acted as counsel for Continental Mortgage and Equity Trust, a
California business trust (the "Company"), in connection with the registration
under the Securities Act of 1933, as amended (the "Act"), pursuant to a
Registration Statement on Form S-3 of the Company (the "Registration Statement")
expected to be filed with the Securities and Exchange Commission (the
"Commission") on November 18, 1997, relating to the offering by the Company from
time to time of up to 150,000 shares of beneficial interest of the Company (the
"Shares of Beneficial Interest"). The Registration Statement provides that such
150,000 Shares of Beneficial Interest (the "Shares") will be offered pursuant to
the Company's Dividend Reinvestment Plan.
In this capacity, we have examined the Registration Statement, the
Prospectus, the Declaration of Trust and Trustee's Regulations of the Company,
the proceedings of the Board of Trustees of the Company relating to the
authorization of the issuance of the Shares, an Officer's Certificate of the
Company dated the date hereof, and such other statutes, certificates,
instruments, and documents relating to the Company and matters of law as we have
deemed necessary to the issuance of this opinion. In such examination, we have
assumed, without independent investigation, the genuineness of all signatures,
the legal capacity of all individuals who have executed any of the aforesaid
documents, the authenticity of all documents submitted to us as originals, the
conformity with originals of all documents submitted to us as copies (and the
authenticity of the originals of such copies), and all public records reviewed
are accurate and complete. As to factual matters, we have relied on the
Officer's Certificate and have not independently verified the matters stated
therein.
Based upon the foregoing and having regard for such legal considerations as
we deem relevant, we are of the opinion and so advise you that upon issuance and
delivery of the Shares in accordance with the terms set forth in the Prospectus
and in exchange for the consideration contemplated therein, the Shares will have
been duly and validly authorized and will be validly issued, fully paid, and
nonassessable.
<PAGE> 2
Continental Mortgage and Equity Trust
November 18, 1997
Page 2
This opinion is solely for the benefit of the addressee hereof, and,
without our prior written consent, may not be quoted in whole or in part or
otherwise referred to in any legal opinion, document, or other report, and may
not be furnished to any person or entity. We consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to this
firm in the Registration Statement and Prospectus which is a part thereof. This
opinion is delivered as of the date hereof and we disclaim any responsibility to
update this opinion at any time following the date hereof.
Very truly yours,
/s/ ANDREWS & KURTH L.L.P.
------------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Continental Mortgage and Equity Trust
Dallas, Texas
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated March 7, 1997, relating to the
consolidated financial statements of Continental Mortgage and Equity Trust for
the year ended December 31, 1996.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Dallas, Texas
November 17, 1997
