<PAGE> 1
As filed with the Securities and Exchange Commission on September 10, 1996
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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REDWOOD TRUST, INC.
<TABLE>
<S> <C> <C>
MARYLAND (Exact Name of Registrant as Specified in its charter) 68-0329422
(State or other jurisdiction of 591 Redwood Highway, Suite 3100 (I.R.S. Employer I.D. Number)
incorporation or organization) Mill Valley, CA 94941
</TABLE>
(415) 389-7373
(Address, including zip code, and telephone number,
including area code, of Principal Executive offices)
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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)
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Copies to:
<TABLE>
<S> <C>
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
</TABLE>
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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: / /
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<TABLE>
<CAPTION>
=======================================================================================================================
Title of each class of Securities to Amount to be Proposed Maximum Proposed Maximum Amount of
be Registered Registered(1) Aggregate Price Per Aggregate Offering Registration
Share(2) Price (1)(2) Fee (3)
=======================================================================================================================
<S> <C> <C> <C> <C>
Preferred Stock, $.01 per value per
share (4)
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Preferred Stock Warrants (4)
- --------------------------------
Common Stock, $.01 per value per $200,000,000.00 $200,000,000.00 $68,965.52
share (4)(5)
- --------------------------------
Common Stock Warrants (4)(5)
- --------------------------------
Shareholders Rights
=======================================================================================================================
Total $200,000,000.00 $200,000,000.00 $68,965.52
=======================================================================================================================
</TABLE>
(1) In no event will the aggregate maximum offering price of all securities
issued pursuant to this Registration Statement exceed $200,000,000.00.
Any securities registered hereunder may be sold separately or as units
with other securities registered hereunder.
(2) The proposed maximum offering 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.
(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) of the Securities Act of 1933, as
amended.
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.
<PAGE> 3
SUBJECT TO COMPLETION DATED SEPTEMBER 10, 1996
COMMON STOCK, PREFERRED STOCK, WARRANTS,
AND SHAREHOLDER RIGHTS TO PURCHASE COMMON STOCK AND PREFERRED STOCK
$200,000,000.00
RWT
REDWOOD TRUST, INC.
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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 class 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 $200,000,000.00 aggregate initial
public offering price, including the exercise price of any Common Stock
Warrants, Preferred Stock Warrants (collectively, "Securities Warrants") or
Shareholders Rights.
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 quoted on the Nasdaq National Market
("Nasdaq") under the symbol "RWTI." On September 6, 1996, the last reported
sales price for the Common Stock was $27.75 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
September 6, 1996, the last reported sales price for the Class B Preferred Stock
and Stock Purchase Warrants was $32.25 per share and $12.25 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."
<PAGE> 4
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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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 UNLAWFUL.
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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 September ___, 1996.
<PAGE> 5
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.
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, 1995.;
(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarters
ended March 31, 1996 and June 30, 1996;
(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 modified or supersedes that 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.
3
<PAGE> 6
THE COMPANY
The Company was incorporated in the State of Maryland on April 11, 1994 and
commenced operations on August 19, 1994. It invests in 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 of the Company
manages the day-to-day operations of the Company, subject to the supervision of
the Company's Board of Directors. 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 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
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<PAGE> 7
or Preferred Stock which are issued and sold hereunder, as described in the
Prospectus Supplement relating to such Common Stock or any class or series of
Preferred Stock. 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 August 7, 1996, 1,362,257 such warrants remained
outstanding.
COMMON STOCK
As of August 7, 1996, there were 8,783,641 outstanding shares of Common
Stock held by 166 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 shareholders 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
Articles of Incorporation 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 class or series,
and the voting rights, if any. As of the date hereof, there are 1,006,250 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 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
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<PAGE> 8
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 Shareholders. 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 shareholders for the election of directors of the Company or any other
matter, or to exercise any rights whatsoever as shareholders of the Company.
SHAREHOLDER RIGHTS
General. The Company may issue, as a dividend at no cost, Shareholder
Rights to holders of record of the Company's Securities or any class thereof on
the applicable record date. If Shareholder Rights are so issued to existing
holders of Securities each Shareholder Right will entitle the registered holder
thereof to purchase the Securities pursuant to the terms set forth in the
applicable Prospectus Supplement.
If Shareholder Rights are issued, the applicable Prospectus Supplement will
describe the terms of such Shareholder 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 Shareholder Rights and in the
case of Shareholder Rights for Preferred Stock, the designation, aggregate
number and terms of the class or series of Preferred Stock purchasable upon
exercise of such Shareholder Rights; (v) the date on and after which such
Shareholder Rights and the related Securities will be transferable separately;
(vi) the date on which the right to exercise such Shareholder 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
Shareholder Rights.
In addition to the terms of the Shareholder Rights and the Securities
issuable upon exercise thereof, the Prospectus Supplement will describe, for a
holder of such Shareholder Rights who validly exercises all Shareholder Rights
issued to such holder, how to subscribe for unsubscribed Securities (issuable
pursuant to unexercised Shareholder Rights issued to other holders) to the
extent such Shareholder Rights have not been exercised.
No Rights as Shareholders. Holders of Shareholder Rights 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
shareholders for the election of directors of the Company or any other matter,
or to exercise any rights whatsoever as shareholders of the Company.
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 Articles of Incorporation prohibit 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.
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<PAGE> 9
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), reduced by the amount of any distributions received in violation of the
Articles of Incorporation 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 Articles of Incorporation 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 Articles of
Incorporation 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 Articles of
Incorporation, 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
7
<PAGE> 10
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 this Offering.
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 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
Articles of Incorporation 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.
8
<PAGE> 11
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 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, 1996, 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 June 30, 1996,
the date of the Company's last unaudited financials 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.
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
9
<PAGE> 12
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 Plan (the "DRP" or
"Plan"). DRP Participants will generally be treated as having received a
dividend distribution equal to the fair value of the Plan Shares that are
purchased with the Participant's reinvested dividends generally on the date that
the Company credits such shares to the Participant's account, 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.
TAXATION OF TAX-EXEMPT ENTITIES
The Company does not expect to incur 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.
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<PAGE> 13
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 SHAREHOLDER RIGHTS
If the Company makes a distribution of Shareholder Rights with respect to
its Common Stock, such distribution generally will be tax-free and a
Shareholder'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 Shareholder so elects regardless of the
value of the Rights, the Shareholder 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 Shareholder will
generally not recognize gain or loss. The Shareholder'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 Shareholder's
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 Shareholders 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 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. Such sales may be effected during a class or series of one or more
pricing periods at prices related to the prevailing market prices reported on
Nasdaq, 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 listed on Nasdaq. Any Securities sold
pursuant to a Prospectus Supplement will also be listed on the Nasdaq National
Market or a national securities exchange, subject to official notice of
issuance. The Company may elect to list any future class or series of Preferred
Stock on an 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.
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<PAGE> 14
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 jurisdiction 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.
Subject to the applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Securities offered hereby may not be
able to simultaneously engage in market making activities with respect to the
Securities for a period of two business days prior to the commencement of such
distribution.
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 plans' 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 Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The Balance Sheet as of December 31, 1995 and 1994 and the Statements of
Operations, Stockholders' Equity and Cash Flows for the period from August 19,
1994 (Commencement of Operations) to December 31, 1995 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.
12
<PAGE> 15
================================================================================
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
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information ................................................. 3
Incorporation of Certain Information by Reference ..................... 3
The Company ........................................................... 4
Use of Proceeds ....................................................... 4
Description of Securities ............................................. 4
Certain Federal Income Tax Considerations ............................. 9
Plan of Distribution .................................................. 11
ERISA Investors ....................................................... 12
Legal Matters ......................................................... 12
Experts ............................................................... 12
</TABLE>
================================================================================
================================================================================
$200,000,000.00
(Common Stock, Preferred Stock, Warrants, and
Shareholder Rights to Purchase Common Stock
and Preferred Stock)
RWT
REDWOOD TRUST, INC.
-------------
PROSPECTUS
-------------
September __, 1996
================================================================================
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered are as set forth below. All
such expenses, except for the SEC registration and filing fees, are estimated:
<TABLE>
<S> <C>
SEC Registration..............................................$ 70,000.00
Legal Fees and Expenses.......................................$ 20,000.00
Accounting Fees and Expenses..................................$ 3,000.00
Printing and Engraving Fees...................................$ 20,000.00
Miscellaneous.................................................$ 12,000.00
Total.........................................................$125,000.00
</TABLE>
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.
<PAGE> 17
Item 16. Exhibits. *
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 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 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
II-2
<PAGE> 18
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
<PAGE> 19
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
September 9, 1996.
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:
<TABLE>
<CAPTION>
Signature Position Date
--------- -------- ----
<S> <C> <C>
/s/ George E. Bull III Chairman of the Board, Chief September 9, 1996
- ------------------------------
George E. Bull, III Executive Officer and Director
(Principal Executive Officer)
/s/ Douglas B. Hansen President, Chief Financial September 9, 1996
- ------------------------------
Douglas B. Hansen Officer and Director
(Principal Financial Officer)
/s/ Frederick H. Borden Vice Chairman of the Board, September 9, 1996
- ------------------------------
Frederick H. Borden Secretary and Director
/s/ Vickie L. Rath Vice President, Treasurer and September 9, 1996
- ------------------------------
Vickie L. Rath Controller (Principal Accounting
Officer)
- ------------------------------
Dan A. Emmett Director September _, 1996
/s/ Thomas F. Farb
- ------------------------------
Thomas F. Farb Director September 9, 1996
- ------------------------------
Nello Gonfiantini Director September _, 1996
/s/ Charles J. Toeniskoetter Director September 9, 1996
- -------------------------------
Charles J. Toeniskoetter
</TABLE>
II-4
<PAGE> 1
EXHIBIT 5.1
[TOBIN & TOBIN LETTERHEAD]
September 9, 1996
The Board of Directors
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
Re: Registration Statement on Form S-3;
filed September 9, 1996
Ladies and Gentlemen:
We have acted as your counsel in connection with the public
offering by Redwood Trust, Inc., a Maryland corporation (the "Company"), of an
aggregate of $200,000,000.00 worth of the following securities which the Company
may, from time to time, issue and sell, and may do so either directly or through
agents, dealers or underwriters: (i) shares of its common stock, par value $0.01
per share ("Common Stock"); (ii) shares of its preferred stock, in one or more
class 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 (collectively, the "Securities").
This opinion is delivered in accordance with the requirements
of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Securities Act").
In connection with this opinion, we have examined and are
familiar with originals or copies, certified or otherwise identified to our
satisfaction, of (i) the Registration Statement on Form S-3, relating to the
Securities, filed with the Securities and Exchange Commission (the "Commission")
under the Securities Act on September 9, 1996 (together with all amendments
thereof and exhibits thereto, the "Registration Statement"), (ii) the Articles
of Incorporation of the Company, including all
<PAGE> 2
TOBIN & TOBIN
The Board of Directors
Redwood Trust, Inc.
September 9, 1996
Page 2
amendments and supplements thereto (collectively, the "Articles of
Incorporation"), (iii) the Bylaws, as amended, of the Company, (iv) resolutions
of the Board of Directors of the Company relating to the filing of the
Registration Statement (the "Resolutions"), and (v) the opinion of Piper &
Marbury L.L.P., related to the Securities, dated on or about the date hereof. We
have also examined such other documents, certificates and records as we have
deemed necessary or appropriate as a basis for the opinion set forth below.
In our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies, and
the authenticity of the originals of such copies. As to any facts material to
this opinion which we did not independently establish or verify, we have relied
upon oral or written statements and representations of officers and other
representatives of the Company and others.
Members of our firm are admitted to the practice of law in the
State of California and we do not express any opinion as to the laws of any
other jurisdiction, except for those matters of Maryland law for which we have
relied solely upon the legal opinion of Piper & Marbury L.L.P., Baltimore,
Maryland.
Based upon and subject to the foregoing, we are of the opinion
and advise you that:
1. When appropriate corporate action has been taken by the
Company to authorize the issuance of the Preferred Stock, and
when the Preferred Stock has been duly established in
accordance with the terms of the Company's Articles of
Incorporation, and applicable law, and, upon issuance,
delivery and payment therefor in the manner contemplated by
the Registration Statement and/or the applicable Prospectus
Supplement, the Preferred Stock will be validly issued, fully
paid and non-assessable.
2. When appropriate corporate action has been taken by
the Company to authorize the issuance of the Common
Stock, and when the Common Stock has been duly
<PAGE> 3
TOBIN & TOBIN
The Board of Directors
Redwood Trust, Inc.
September 9, 1996
Page 3
established in accordance with the terms of the Company's
Articles of Incorporation, and applicable law, and, upon
issuance, delivery and payment therefor in the manner
contemplated by the Registration Statement and/or the
applicable Prospectus Supplement, the Common Stock will be
validly issued, fully paid and non-assessable.
3. When appropriate corporate action has been taken by the
Company to authorize applicable Warrant Agreements and the
final terms thereof have been duly established, the Warrant
Agreements, when duly executed and delivered by the Company,
will constitute legally valid and binding agreements of the
Company, enforceable against the Company in accordance with
their terms.
4. When appropriate corporate action has been taken by the
Company to authorize the issuance of the Preferred Stock
Warrants and the applicable Securities issuable upon the
exercise thereof, and when the final terms thereof have been
duly established and the Preferred Stock Warrants have been
duly executed and delivered by the Company and countersigned
by the Warrant Agent in accordance with the applicable Warrant
Agreement and delivered to and paid for by the Company in the
manner contemplated by the Registration Statement and/or the
applicable Prospectus Supplement, the Preferred Stock Warrants
will constitute legally valid and binding obligations of the
Company in accordance with their respective terms.
5. When appropriate corporate action has been taken by the
Company to authorize the issuance of the Common Stock Warrants
and the applicable Securities issuable upon the exercise
thereof, and when the final terms thereof have been duly
established and the Common Stock Warrants have been duly
executed and delivered by the Company and countersigned by the
Warrant Agent in accordance with the applicable Warrant
Agreement and delivered to and paid for by the Company in the
manner contemplated by the Registration Statement and/or the
applicable Prospectus Supplement, the Common Stock Warrants
will constitute legally valid and binding
<PAGE> 4
TOBIN & TOBIN
The Board of Directors
Redwood Trust, Inc.
September 9, 1996
Page 4
obligations of the Company in accordance with their
respective terms.
6. When appropriate corporate action has been taken by the
Company to authorize the issuance of Shareholder Rights and
the applicable Securities issuable upon the exercise thereof,
and when the final terms thereof have been duly established
and the Shareholder Rights have been duly executed and
delivered by the Company and countersigned by the Subscription
Agent in accordance with the applicable Prospectus Supplement
and delivered to and paid for by the Company in the manner
contemplated by the Registration Statement and the applicable
Prospectus Supplement, the Shareholder Rights will constitute
legally valid and binding obligations of the Company in
accordance with their respective terms.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to the Registration Statement and to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or under
the rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
TOBIN & TOBIN
<PAGE> 1
EXHIBIT 5.2
PIPER & MARBURY
L.L.P.
CHARLES CENTER SOUTH
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201-3018 WASHINGTON
410-539-2530 NEW YORK
FAX: 410-539-0489 PHILADELPHIA
EASTON
September 9, 1996
Redwood Trust, Inc.
591 Redwood Highway, Suite 3100
Mill Valley, California 94941
Ladies and Gentlemen:
We have acted as Maryland counsel to Redwood Trust, Inc., a Maryland
corporation (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 expected to be filed with the Securities
and Exchange Commission (the "Commission") on September 9, 1996, (the
"Registration Statement"), including the prospectus included therein at the time
the Registration Statement is declared effective (the "Prospectus"), for
offering by the Company from time to time of up to $200,000,000 aggregate
initial offering price of: (i) shares of common stock, par value $0.01 per share
(the "Common Stock"); (ii) shares of preferred stock, par value $0.01 per share
(the "Preferred Stock"); (iii) warrants to purchase Common Stock or Preferred
Stock (the "Warrants"); (iv) rights to purchase shares of Common Stock or
Preferred Stock (the "Shareholder Rights"); and (v) any combination of the
foregoing types of securities. The Common Stock, the Preferred Stock, the
Warrants and the Shareholder Rights are collectively referred to herein as the
"Securities." The Registration Statement provides that the Securities may be
offered separately or together, in separate series, in amounts, at prices, and
on terms to be set forth in one or more supplements to the Prospectus (each a
"Prospectus Supplement"). This opinion is being provided at your request in
connection with the filing of the Registration Statement.
In our capacity as Maryland counsel, we have reviewed the following:
(a) The Registration Statement;
<PAGE> 2
PIPER & MARBURY
L.L.P.
(b) The Charter of the Company, certified by the Department of
Assessments and Taxation of the State of Maryland (the "Department");
(c) A copy of the By-Laws of the Company as in effect on the
date hereof (the "By-Laws");
(d) The Preliminary Prospectus dated September 9, 1996 (the
"Preliminary Prospectus") relating to the issuance of the Securities,
which forms part of the Registration Statement;
(e) Certified resolutions of the Board of Directors of the
Company relating to the Company's organization and to the Board's
authorization of the filing of the Registration Statement;
(f) A good standing certificate for the Company, dated
September 3, 1996, issued by the Department;
(g) A Secretary's Certificate of the Company, dated the date
hereof (the "Secretary's Certificate"), as to certain factual matters;
and
(h) Such other documents as we have considered necessary to
the rendering of the opinions expressed below.
In our examination of the aforesaid documents, 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, and the conformity
with originals of all documents submitted to us as copies (and the authenticity
of the originals of such copies), and that all public records reviewed are
accurate and complete. In making our examination of documents executed by
parties other than the Company, we have assumed that such parties had the power,
corporate or other, to enter into and perform all obligations thereunder, and we
have also assumed the due authorization by all requisite action, corporate or
other, and the valid execution and delivery by such parties of such documents
and the validity, binding effect and enforceability thereof with respect to such
parties. As to any facts material to this opinion which we did not independently
establish or verify, we have relied solely upon the Secretary's Certificate.
- 2 -
<PAGE> 3
PIPER & MARBURY
L.L.P.
We assume that prior to the issuance of any shares of Preferred Stock
or Common Stock or of Warrants or Shareholder Rights, there will exist, under
the Charter of the Company, the requisite number of authorized but unissued
shares of Preferred Stock or Common Stock, as the case may be, and that all
actions necessary to the creation of any such Preferred Stock, whether by
Charter amendment or by classification or reclassification of existing capital
stock and the filing of Articles Supplementary, will have been taken. We further
assume that appropriate certificates representing shares of Preferred Stock or
Common Stock will be executed and delivered upon issuance and sale
of any shares of Preferred Stock or Common Stock, as the case may be and will
comply with all applicable requirements of Maryland law. We further assume that
any Common Stock Warrants will be issued under a valid and legally binding
warrant agreement (a "Common Stock Warrant Agreement") that conforms to the
description thereof set forth in the Registration Statement; that any Preferred
Stock Warrants will be issued under a valid and legally binding warrant
agreement (a "Preferred Stock Warrant Agreement") that conforms to the
description thereof set forth in the Registration Statement; and that any
Shareholder Rights to acquire the Common Stock or the Preferred Stock will
evidenced by a valid and legally binding subscription rights that conform to the
description thereof set forth in the Registration Statement. Finally, we assume
that the underwriting agreements for offerings of the Common Stock, the
Preferred Stock, the Common Stock Warrants, and the Preferred Stock Warrants
(each, an "Underwriting Agreement," and collectively the "Underwriting
Agreements") will be valid and legally binding contracts that conform to the
description thereof set forth in the applicable Prospectus Supplement
We assume that the issuance, sale, amount and terms of the Securities
to be offered from time to time will be authorized and determined by proper
action of the Board of Directors of the Company in accordance with the
parameters described in the Registration Statement (each, a "Board Action") and
in accordance with the Company's Charter and By-Laws and with the applicable
Maryland law.
To the extent that the obligations of the Company under any Common
Stock Warrant Agreement or Preferred Stock Warrant Agreement (each, a "Warrant
Agreement") may be dependent upon such matters, we assume for purposes of this
opinion that the financial institution to be identified in such Warrant
Agreement as warrant agent (the "Warrant Agent") will be duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization; that the Warrant Agent will be duly qualified to engage in the
activities contemplated by such Warrant Agreement; that
<PAGE> 4
PIPER & MARBURY
L.L.P.
such Warrant Agreement will have been duly authorized, executed and delivered by
the Warrant Agent and will constitute the legally valid and binding obligation
of the Warrant Agent enforceable against the Warrant Agent in accordance with
its terms; that the Warrant Agent will be in compliance, generally, with respect
to acting as Warrant Agent under such Warrant Agreement, with all applicable
laws and regulations; and that the Warrant Agent will have the requisite
organization and legal power and authority to perform its obligations under such
Warrant Agreement.
Based upon and subject to the foregoing, we are of the opinion that, as
of the date hereof:
1. Upon due authorization by Board Action of an issuance of
Common Stock, and upon issuance and delivery of certificates for shares
of such Common Stock against payment therefor in accordance with the
terms and provisions of such Board Action, the Registration Statement
(as declared effective under the Act), the Prospectus or the applicable
Prospectus Supplement and, if applicable, an Underwriting Agreement, or
upon issuance and delivery of certificates for shares of such Common
Stock pursuant to the exercise of one or more Common Stock Warrants or
of one or more Common Stock Shareholder Rights, the shares of Common
Stock represented by such certificates will be duly authorized, validly
issued, fully paid and non-assessable.
2. When a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and applicable Maryland law,
and, upon issuance and delivery of certificates for shares of such
series of Preferred Stock against payment therefor in accordance with
the terms and provisions of such Board Action, the Registration
Statement (as declared effective under the Act), the Prospectus or the
applicable Prospectus Supplement and, if applicable, an Underwriting
Agreement, or upon issuance and delivery of certificates for shares of
such series of Preferred Stock pursuant to the exercise of one or more
Preferred Stock Warrants or of one or more Preferred Stock Shareholder
Rights, the shares of Preferred Stock represented by such certificates
will be duly authorized, validly issued, fully paid and non-assessable.
<PAGE> 5
PIPER & MARBURY
L.L.P.
3. When the Common Stock Warrants have been duly established
by the related Common Stock Warrant Agreement, duly authenticated by
the Warrant Agent and duly authorized and established by the applicable
Board Action, and when warrant certificates representing the Common
Stock Warrants have been duly executed and delivered on behalf of the
Company against payment therefor in accordance with the terms and
provisions of such Board Action, the Common Stock Warrant Agreement,
the Registration Statement (as declared effective under the Act), the
Prospectus or the applicable Prospectus Supplement and, if applicable,
an Underwriting Agreement, the Common Stock Warrants will be duly
authorized and will constitute valid obligations of the Company.
4. When a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and applicable Maryland law,
when the Preferred Stock Warrants for such series of Preferred Stock
have been duly established by the related Preferred Stock Warrant
Agreement, duly authenticated by the Warrant Agent and duly authorized
and established by the applicable Board Action, and when warrant
certificates representing the Preferred Stock Warrants have been duly
executed and delivered on behalf of the Company against payment
therefor in accordance with the terms and provisions of such Board
Action, the Preferred Stock Warrant Agreement, the Registration
Statement (as declared effective under the Act), the Prospectus or the
applicable Prospectus Supplement and, if applicable, an Underwriting
Agreement, the Preferred Stock Warrants will be duly authorized and
will constitute valid obligations of the Company.
5. Upon due authorization by Board Action of an issuance of
the Common Stock Shareholder Rights, and upon the issuance of the
Common Stock Shareholder Rights in accordance with the terms and
provisions of such Board Action, the Registration Statement (as
declared effective under the Act), the Prospectus or the applicable
Prospectus Supplement, the terms of the Company's Charter and
applicable Maryland law, the Common Stock Shareholder Rights will be
duly authorized and will constitute valid obligations of the Company.
<PAGE> 6
PIPER & MARBURY
L.L.P.
6. When a series of the Preferred Stock has been duly
authorized and established in accordance with the applicable Board
Action, the terms of the Company's Charter and applicable Maryland law,
upon due authorization by Board Action of an issuance of the Preferred
Stock Shareholder Rights for such series of Preferred Stock, and upon
the issuance of the Preferred Stock Shareholder Rights for such series
of Preferred Stock in accordance with the terms and provisions of such
Board Action, the Registration Statement (as declared effective under
the Act), the Prospectus or the applicable Prospectus Supplement, the
terms of the Company's Charter and applicable Maryland law, such
Preferred Stock Shareholder Rights will be duly authorized and will
constitute valid obligations of the Company.
The opinions stated herein relating to the validity and binding nature
of obligations of the Company are subject to (i) the effect of any applicable
bankruptcy, insolvency (including, without limitation, all laws relating to
fraudulent transfers), reorganization, moratorium or similar laws affecting
creditors' rights generally and (ii) the effect of general principals of equity
(regardless of whether considered in a proceeding in equity or at law).
The opinions expressed above are limited to the laws of the State of
Maryland, exclusive of the securities or "blue sky" laws of the State of
Maryland. All of the foregoing opinions are rendered as of the date hereof. We
assume no obligation to update such opinions to reflect any facts or
circumstances which may hereafter come to our attention or changes in the law
which may hereafter occur. To the extent that any documents referred to herein
are governed by the law of a jurisdiction other than Maryland, we have assumed
that the laws of such jurisdiction are the same as the law of Maryland.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.2 to the Registration Statement and to the reference to our firm under
the heading "Legal Matters" in the Registration Statement. We further consent to
the reliance on this opinion by Tobin & Tobin in rendering their opinion to the
Company in connection with the Registration Statement. The opinions expressed in
this letter are limited to the matters set forth in this letter, and no other
opinion should be inferred beyond the matters expressly stated.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE> 1
EXHIBIT 8.1
[GIANCARLO & GNAZZO LETTERHEAD]
September 9, 1996
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
Re: Redwood Trust, Inc. Shelf Registration
Dear Ladies and Gentlemen:
You have requested our opinion in connection with the Form S-3 Shelf
Registration Statement, dated September 9, 1996 (the "Registration Statement")
being filed by Redwood Trust, Inc. (the "Company") with respect to an aggregate
$200,000,000.00 worth of the following securities which the Company may issue
and sell from time to time: (i) shares of its common stock, par value of $0.01
per share (the "Common Stock"); (ii) shares of its preferred stock, in one or
more classes or series (the "Preferred Stock"); (iii) warrants to purchase
shares of Common Stock or Preferred Stock; (iv) rights to purchase shares of
Common Stock or Preferred Stock issued to shareholders; and (v) any combination
of the foregoing, either individually or as units consisting of one or more of
the foregoing (collectively, the "Securities").
In connection with the Registration Statement, we have acted as your
special tax counsel and have assisted in the preparation of the tax summary for
such Registration Statement. In formulating our opinions, we have reviewed (i)
the Registration Statement, (ii) the Articles of Incorporation of the Company,
as amended and supplemented to date, (iii) the Bylaws, as amended, of the
Company, and (iv) such resolutions, certificates, records, and other documents
provided by the Company as we have deemed necessary or appropriate as a basis
for the opinions set forth below. In addition, the Company has provided us with
a certificate (the "Officer's Certificate"), executed by a duly appointed and
knowledgeable officer of the Company, and upon which we have relied, setting
forth certain representations relating to various factual and other matters
including the prior, current and future methods of operation of the Company. We
have also relied upon the opinion of Piper & Marbury, L.L.P., dated on or about
September 9, 1996, with respect to certain matters of Maryland law.
<PAGE> 2
Redwood Trust, Inc.
September 9, 1996
Page 2
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or other copies, and the
authenticity of the originals of such copies.
In rendering our opinions, we have assumed that the transactions
described in or contemplated by the foregoing documents have been or will be
consummated in accordance with such operative documents, and that such documents
accurately reflect the material facts of such transactions. In addition, our
opinions are based on the correctness of the following specific assumptions: (i)
the Company has been and will continue to be organized and operated in the
manner described in the Officer's Certificate, the Registration Statement, and
the other relevant documents referred to above; and (ii) there have been no
changes in the applicable laws of the State of Maryland, the Internal Revenue
Code of 1986, as amended (the "Code"), the regulations promulgated thereunder by
the Treasury Department (the "Treasury Regulations"), and the interpretations of
the Code and the Treasury Regulations by the courts and the Internal Revenue
Service, all as they exist on the date of this letter. With respect to these
assumptions, it should be noted that (x) in the case of the former assumption,
the representations set forth in the Officer's Certificate are highly factual in
nature and reflect an intention with respect to the future conduct of the
business of the Company which may not be achievable if there are future changes
in the circumstances of the Company and (y) in the case of the latter
assumption, statutes, regulations, judicial decisions, and administrative
interpretations are subject to change at any time and, in some circumstances,
with retroactive effect. Any material change that is made after the date hereof
in any of the foregoing bases for our opinions could adversely affect our
conclusions.
Based on the foregoing, we are of the opinion that the Company has been
organized and operated in conformity with the requirements for qualification as
a "real estate investment trust" under the Code since the commencement of its
operations on August 19, 1994 through June 30, 1996, the date of the most recent
unaudited financials statements of the Company reviewed by us, and the Company's
current and contemplated methods of operation, as described in the Registration
Statement and as represented by the Company, will enable it to continue to so
qualify.
Other than as expressly stated above, we express no opinion on any
issue relating to the Company or to any investment therein or under any law
other than the Federal income tax laws.
We are furnishing this opinion to you solely in connection with the
filing of the Registration Statement and it is not to be relied upon, used,
circulated, quoted or otherwise referred to for any other purpose without our
express written permission.
<PAGE> 3
Redwood Trust, Inc.
September 9, 1996
Page 3
We consent to the filing of this opinion as an Exhibit to the
Registration Statement and to the reference to Giancarlo & Gnazzo, A
Professional Corporation under the caption "Certain Federal Income Tax
Considerations" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ Giancarlo & Gnazzo,
---------------------------
A Professional Corporation
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[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-3 (File No.
333- ) of our report dated March 1, 1996 on our audit of the financial
statements of Redwood Trust, Inc. We also consent to the reference to our firm
under the caption "Experts."
COOPERS & LYBRAND LLP
San Francisco, California
September 9, 1996
