<PAGE> 1
As filed with the Securities and Exchange Commission on January 23, 1997
Registration No.333-
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------
FORM S-8/S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
--------------------------------------------
<TABLE>
<S> <C> <C>
REDWOOD TRUST, INC.
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
(415) 389-7373
</TABLE>
(Address, including zip code, and telephone number, including area code, of
Principal Executive offices)
--------------------------------------------
AMENDED AND RESTATED
1994 EXECUTIVE AND NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(Full title of the Plan)
--------------------------------------------
George E. Bull, III
Chairman of the Board and Chief Executive Officer
REDWOOD TRUST, INC.
591 Redwood Highway, Suite 3100
Mill Valley, CA 94941
(415) 389-7373
(Name, Address, including zip code, and telephone number, including area code,
of Agent for Service)
--------------------------------------------
Copies to:
Douglas B. Hansen Phillip R. Pollock, Esq.
President and Chief Financial Officer TOBIN & TOBIN
REDWOOD TRUST, INC. One Montgomery Street, 15th Floor
591 Redwood Highway, Suite 3100 San Francisco, CA 94104
Mill Valley, CA 94941 (415) 433-1400
(415) 389-7373
--------------------------------------------
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 to be made pursuant to Rule 434, please check
the following box: / /
--------------------------------------------
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of securities to be Amount to be Proposed maximum offering Proposed maximum aggregate Amount of
registered registered price per share(1) offering price(1) registration fee
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value 1,649,486 $36.88 $60,833,043.68 $20,976.91
$.01 per share(2)
===================================================================================================================================
</TABLE>
(1) Calculated in accordance with Rule 457(c) and (h) based on the average
of the high and low prices, $37.25 and $36.50, respectively, reported
for the Common Stock on the Nasdaq National Market for December 31,
1996.
(2) In addition, pursuant to Rule 416(c) under the Securities Act of 1933,
as amended, this registration statement also covers an indeterminate
amount of interests to be offered or sold pursuant to the employee
benefit plan described herein.
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
EXPLANATORY NOTE
This Registration Statement contains two parts. The first part contains
a prospectus pursuant to Form S-3 (in accordance with Section C of the General
Instructions to Form S-8) which covers reoffers and resales of control
securities and restricted securities of the Registrant which previously have
been issued or which shall be issued upon exercise of options granted pursuant
to the Redwood Trust, Inc. Amended and Restated 1994 Executive and Non-Employee
Director Stock Option Plan. The second part of this Registration Statement
contains Information Required in the Registration Statement pursuant to Part II
of Form S-8 and certain items from "Information Not Required in the Prospectus"
pursuant to Part II of Form S-3. Pursuant to the Note to Part I of the
instructions to Form S-8, the Plan Information specified by Part I is not being
filed with the Securities and Exchange Commission.
<PAGE> 4
PART I
INFORMATION REQUIRED IN REOFFER PROSPECTUS
SUBJECT TO COMPLETION DATED JANUARY 23, 1997
1,649,486 SHARES OF COMMON STOCK
RWT
REDWOOD TRUST, INC.
Redwood Trust, Inc. ("Redwood Trust" or the "Company") has adopted an
Amended and Restated 1994 Executive and Non-Employee Director Stock Option Plan
(the "Stock Option Plan" or the "Plan") which provides for the grant of
qualified incentive stock options ("ISOs") which meet the requirements of
section 422 of the Code, stock options not so qualified ("NQSQs"), dividend
equivalent rights ("DERs"), deferred stock, restricted stock, performance
shares, stock appreciation and limited stock awards ("Awards"). Options and
Awards under the Stock Option Plan are made exclusively in shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"). On March
8, 1996, the Company's Board of Directors adopted, subject to approval of the
stockholders, amendments to the Stock Option Plan which would provide for an
increase in the maximum aggregate number of shares of the Company's Common Stock
available for grant under the Stock Option Plan and certain other changes. Such
amendments were approved at the Annual Meeting of Stockholders on June 14, 1996
and became effective on such date. On December 13, 1996, certain additional
non-material changes to the Plan were approved by the Board of Directors and
became effective on that date. On January 22, 1997, the Board of Directors
approved amended and restated resolutions authorizing the issuance of the Common
Stock under the Plan.
This Prospectus relates to 1,649,486 shares (the "Shares") of the Company's
Common Stock, which may be sold from time to time by the selling stockholders
named herein (the "Selling Stockholders"), which Shares which have been issued
or are issuable to the Selling Stockholders pursuant to options (the "Options")
granted pursuant to stock option agreements between the Company and the Selling
Stockholders. The Company has received or will receive various amounts ranging
from approximately $0.10 to $36.875 for each Share issued upon the exercise of
the Options. The Company will not receive any of the proceeds from the sale of
the Shares by the Selling Stockholders. All expenses of registration incurred in
connection with this offering are being borne by the Company; all selling and
other expenses incurred by the Selling Stockholders in connection with the sale
of the Shares will be borne by the Selling Stockholders. The Company is not
aware of any underwriting arrangements with respect to the sale of any of the
Shares by the Selling Stockholders.
The Shares may be offered by or for the account of the Selling Stockholders
or by their pledgees, donees, transferees or other successors in interest, from
time to time, on the Nasdaq National Market ("Nasdaq") or on any stock exchange
on which the Shares may be listed at the time of sale, in negotiated
transactions, or through a combination of such methods of sale, at fixed 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. The
transactions may be effected by selling the Shares to or through broker-dealers
who may receive compensation in the form of discounts, concessions, or
commissions from the Selling Stockholders and/or the purchasers of the Shares
(which compensation as to a particular broker-dealer might be in excess of
customary commissions). Any broker-dealer acquiring Shares from a Selling
Stockholder may sell such Shares in its normal market making activities, through
other brokers on a principal or agency basis, in negotiated transactions, or
through a combination of such methods. See "Selling Stockholders" and "Plan of
Distribution."
(CONTINUED ON NEXT PAGE)
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.
FOR INFORMATION CONCERNING THE COMPANY'S CURRENT FINANCIAL CONDITION
AND OTHER IMPORTANT FACTORS, SEE "AVAILABLE INFORMATION" AND
"INCORPORATION OF CERTAIN INFORMATION BY REFERENCE."
The date of this Prospectus is January ___, 1997
<PAGE> 5
(CONTINUED FROM PREVIOUS PAGE)
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE HEREIN SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER
THAN THOSE DESCRIBED ON THE COVER PAGE OR AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE SHARES IN ANY STATE OR OTHER JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALES MADE HEREUNDER, UNDER ANY CIRCUMSTANCES, SHALL CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
BETWEEN THE DATE HEREOF AND THE DATE OF ANY SUCH SALE.
<PAGE> 6
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 9.74% Cumulative Convertible Preferred Stock (the "Class B
Preferred Stock") of the Company are currently quoted on the Nasdaq National
Market. Reports, proxy statements and other information concerning the Company
may be inspected at the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006. In addition, holders of the Common Stock
and Class B Preferred Stock will receive annual reports containing audited
financial statements with a report thereon by the Company's independent
certified public accountants, and quarterly reports containing unaudited summary
financial information for each of the first three quarters of each fiscal year.
The Company files information electronically with the Commission, and the
Commission maintains a Web Site that contains reports, proxy and information
statements and other information regarding registrants (including the Company)
that file electronically with the Commission. The address of the Commission's
Web Site is <http://www.sec.gov>.
Copies of the Registration Statement on Form S-8/S-3, together with all
amendments, exhibits and documents incorporated therein by reference (the
"Registration Statement"), of which this Prospectus forms a part, is on file at
the offices of the Commission pursuant to the Securities Act of 1933, as amended
(the "Securities Act") with respect to the Shares offered by this Prospectus.
This Prospectus omits certain of the information contained in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission, and reference is hereby made to the Registration
Statement for further information with respect to the Company and the Shares
offered hereby. Statements contained in this Prospectus as to the contents of
any exhibit, contract or other document referred to are not necessarily
complete, and in each instance each statement is qualified in all respects by
reference made to a copy of such exhibit, contract or other document filed as an
exhibit to the Registration Statement or otherwise filed with the SEC and
incorporated by reference herein or otherwise filed with the Commission. The
Company currently furnishes its stockholders 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, June 30, 1996 and September 30, 1996;
(c) The Company's Current Report on Form 8-K filed on January 7, 1997
(Reg. No. 000-26436);
(d) 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; and
(e) The registration statement for the Company's Dividend Reinvestment and
Stock Purchase Plan on Form S-3, filed December 17, 1996 (Reg. No.
333-18061).
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 filing of a post-effective amendment indicating that such Shares have been
sold, or deregistering all of the Shares that, at the time of such
post-effective amendment, remain unsold, shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained herein or in any document incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document, which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such 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 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> 7
THE COMPANY
The Company is a real estate investment trust which 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. The Company's
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 will generally not be subject to tax on its Federal income to
the extent that it distributes its earnings to its stockholders and maintains
its qualification as a REIT. The Company was incorporated in the State of
Maryland on April 11, 1994, commenced operations on August 19, 1994 and is
self-advised and self-managed. The Company's principal executive office is
located at 591 Redwood Highway, Suite 3100, Mill Valley, California 94941.
Additional information regarding the Company, including the audited
financial statements of the Company and descriptions of the Company's currently
outstanding Common Stock, Stock Purchase Warrants and Class B Preferred Stock,
is contained in the documents incorporated by reference herein. See
"Incorporation of Certain Information by Reference," above.
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of Shares which may
be sold under this Prospectus for the respective accounts of each of the Selling
Stockholders. The Company, however, will derive proceeds from exercise of the
Options. Such proceeds will be available to the Company for working capital and
general corporate purposes. No assurance can be given, however, as to when or if
any or all of the Options will be exercised.
SELLING STOCKHOLDERS
As of December 31, 1996, options for up to 1,649,486 shares of Common Stock
were authorized to be issued under the Stock Option Plan, options to acquire
421,625 shares were issued and outstanding under such Plan and options to
acquire 89,166 shares had previously been exercised, leaving 1,138,695 shares
available for the grant of additional options, Awards or DERs. The Plan provides
that, in connection with any reorganization, merger, consolidation,
recapitalization, stock split or similar transaction, the Compensation Committee
shall appropriately adjust the number of shares of Common Stock subject to
outstanding options, Awards and DERs and the total number of shares for which
options, Awards or DERs may be granted under the Plan.
The following table identifies, as of December 31, 1996, (a) the name of
each Selling Stockholder and the nature of any position, office or other
material relationship which each such Selling Stockholder has had with the
Company or any of its affiliates within the last three (3) years; (b) the total
number of shares beneficially owned by each Selling Stockholder; (c) the number
of shares of Common Stock offered for each such Selling Stockholder's account;
and (e) the number of shares of Common Stock and the percentage beneficially
owned by each such Selling Stockholder after completion of the offering,
assuming all Shares offered pursuant to this Prospectus are sold.
4
<PAGE> 8
<TABLE>
<CAPTION>
Shares to be Beneficially
Shares of Common Owned upon Completion
Stock Beneficially Shares of Offering(1)(3)
Relationship Owned as of Offered -------------------------
Selling Stockholder to Company December 31, 1996(1) Hereby(2) Number Percent
------------------- ---------- -------------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
George E. Bull III Chairman of the 229,386(4) 126,514 102,872 *
Board, Chief Executive
Officer and Director
(Principal Executive
Officer)
Douglas B. Hansen President, Chief 200,920(5) 126,513 74,407 *
Financial Officer and
Director (Principal
Financial Officer)
Frederick H. Borden Vice President of the 166,483(6) 107,587 58,896 *
Board, Secretary and
Director
Dan A. Emmett Director 17,288(7) 10,618 6,670 *
Thomas F. Farb Director 10,618(8) 10,618 0 *
Nello Gonfiantini Director 30,730(9) 10,618 20,112 *
Charles J. Toeniskoetter Director 12,338(10) 10,618 1,720 *
Vickie L. Rath Vice President, 50,609(11) 46,609 4,000 *
Treasurer and
Controller (Principal
Accounting Officer)
</TABLE>
- ----------------------------
* Less than one percent.
(1) Assuming full exercise of Warrants and full exercise of stock options
granted to December 31, 1996, whether or not vested, including DERs
accrued through such date.
(2) Indicates all shares of Common Stock previously acquired by the Selling
Stockholder under the Plan or issuable to the Selling Stockholder upon
exercise of outstanding options granted under the Plan. Excludes DERs
that may accrue on unexercised options in future periods.
(3) Assumes that all options are exercised and all shares offered hereby
are sold, that no additional shares will be acquired and that no shares
other than those offered hereby will be sold.
(4) Includes 97,662 shares of Common Stock currently outstanding held of
record by the Bull Trust, 15,310 shares of Common Stock issuable upon
the exercise of Warrants held of record by the Bull Trust, 2,500 shares
of Common Stock currently outstanding held of record by Mr. Bull's
children, 500 shares of Common Stock issuable upon the exercise of
Warrants held of record by Mr. Bull's children and 101,792 shares of
Common Stock issuable upon the exercise of stock options including
DERs.
(5) Includes 101,791 shares of Common Stock issuable upon the exercise of
stock options including DERs.
(6) Includes 130 shares of Common Stock currently outstanding held of
record by Mr. Borden's children, 130 shares of Common Stock issuable
upon the exercise of Warrants held of record by Mr. Borden's children
and 82,865 shares of Common Stock issuable upon the exercise of stock
options including DERs.
(7) Includes 9,368 shares of Common Stock issuable upon the exercise of
stock options including DERs.
(8) Includes 9,368 shares of Common Stock issuable upon the exercise of
stock options including DERs.
(9) Includes 9,368 shares of Common Stock issuable upon the exercise of
stock options including DERs.
(10) Includes 660 shares and 9,368 shares of Common Stock issuable upon the
exercise of Warrants and stock options including DERs, respectively.
Also includes 400 shares which Mr. Toeniskoetter has voting and
investment power in
5
<PAGE> 9
the TBI Construction Profit Sharing Trust.
(11) Includes 38,609 shares of Common Stock issuable upon the exercise of
stock options including DERs.
The number, if any, and terms of options, DERs or Awards which may be
granted in the remainder of 1997 and in future periods is not presently
determinable as the Compensation Committee has sole discretion to determine the
number, if any, and terms of such options, DERs or Awards.
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 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. FOR A FULLER DISCUSSION OF FEDERAL INCOME TAX CONSIDERATIONS, SEE THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1995.
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 September 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. In addition,
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,
6
<PAGE> 10
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 GENERALLY
Distributions (including constructive distributions) made to holders of
Common Stock, other than tax-exempt entities, will generally be subject to tax
as ordinary income to the extent of the Company's current and accumulated
earnings and profits as determined for Federal income tax purposes. If the
amount distributed exceeds a stockholder's allocable share of such earnings and
profits, the excess will be treated as a return of capital to the extent of the
stockholder's adjusted basis in its shares, which will not be subject to tax,
and thereafter as a taxable gain from the sale or exchange of a capital asset.
Distributions designated by the Company as capital gain dividends will
generally be subject to tax as long-term capital gain to stockholders, to the
extent that the distribution does not exceed the Company's actual net capital
gain for the taxable year. Distributions by the Company, whether characterized
as ordinary income or as capital gain, are not eligible for the corporate
dividends received deduction. In the event that the Company realizes a loss for
the taxable year, stockholders will not be permitted to deduct any share of that
loss. Further, if the Company (or a portion of its assets) were to be treated as
a taxable mortgage pool, any "excess inclusion income" that is allocated to a
stockholder would not be allowed to be offset by a net operating loss of such
stockholder. Future Treasury Department regulations may require that the
stockholders take into account, for purposes of computing their individual
alternative minimum tax liability, certain tax preference items of the Company.
Dividends declared during the last quarter of a taxable year and
actually paid during January of the following taxable year are generally treated
as if received by the stockholder on the record date of the dividend payment and
not on the date actually received. In addition, the Company may elect to treat
certain other dividends distributed after the close of the taxable year as
having been paid during such taxable year, but stockholders still will be
treated as having received such dividend in the taxable year in which the
distribution is made.
Upon a sale or other disposition of Common 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
Common Stock is sold after a record date but before a payment date for declared
dividends on such stock, a stockholder will nonetheless be required to include
such dividend in income in accordance with the rules above for distributions,
whether or not such dividend is required to be paid over to the purchaser.
The Company also maintains a Dividend Reinvestment and Stock Purchase
Plan (the "DRP"). DRP Participants will generally be treated as having received
a dividend distribution equal to the fair market value on the Investment Date
(as defined in the DRP) of the Plan Shares that are purchased with the
Participant's reinvested dividends and/or optional cash payments, 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. For more
detailed tax disclosure information regarding this topic, see the DRP which is
available upon request to the Company.
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 excess inclusion income (within
the meaning of Section 860E(c) of the Code) 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.
7
<PAGE> 11
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.
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 possible reduction pursuant to
an applicable income tax treaty.
ERISA INVESTORS
Because the Shares will qualify as a "publicly offered security,"
employee benefit plans and Individual Retirement Accounts may purchase Shares
and treat such Shares, and not the Company's assets, as plan assets. Fiduciaries
of ERISA plans should consider (i) whether an investment in the Shares 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.
PLAN OF DISTRIBUTION
The sales of Shares by the Selling Stockholders, or by their pledgees,
donees, transferees or other successors in interest, may be effected, from time
to time, by offerings to or through underwriters or directly to other purchasers
or through agents in one or more transactions on the Nasdaq National Market or
other applicable securities exchange on which the Shares may be listed at the
time of sale, in one or more private transactions, or in a combination of such
methods of sale, at prices and on terms then prevailing, at prices related to
such prices, or at negotiated prices. The transactions may be effected by
selling Shares to or through such broker-dealers, and such broker-dealers may
receive compensation in the form of discounts, concessions, or commissions from
the Selling Stockholders and/or the purchasers of Shares (which compensation as
to a particular broker-dealer might be in excess of customary commissions).
The Selling Stockholders, their pledgees, donees, transferees or other
successors in interest, and any broker-dealers that act in connection with the
sale of the Shares hereunder might be deemed to be "Underwriters" within the
meaning of Section 2(11) of the Securities Act; any commissions received by them
and any profit on the resale of Shares as principal might be deemed to be
underwriting compensation under the Securities Act.
Any broker-dealer acquiring shares from a Selling Stockholder may sell
the Shares either directly, in its normal market-making activities, through or
to other brokers on a principal or agency basis, or to its customers. Any such
sales may be at prices then prevailing on the Nasdaq National Market or other
applicable securities exchange, at prices related to such prevailing market
prices, at negotiated prices or a combination of both methods.
The Company has advised the Selling Stockholders that anti-manipulative
Rules 10b-2, 10b-6 and 10b-7 under the Exchange Act may apply to their sales in
the market, has furnished the Selling Stockholders with a copy of these Rules
and has informed the Selling Stockholders of the possible need for them to
deliver copies of this Prospectus. The Selling Stockholders may indemnify any
broker-dealer that participates in the transactions involving the sale of the
Shares against certain liabilities, including liabilities arising under the
Securities Act. Any commissions paid or any discounts or concessions allowed to
any such broker-dealers, and, if any such broker-dealers purchase Shares as
principal, any profits received on the resale of such shares, may be deemed to
be underwriting discounts and commissions under the Securities Act.
Upon the Company's being notified by any Selling Stockholder that any
material arrangement has been entered into with a broker-dealer for the sale of
Shares through a cross or block trade, a supplemental prospectus will be filed
under Rule 424(c) under the Securities Act, setting forth the name of the
participating broker-dealer(s), the number of Shares involved, the price at
which such Shares were sold by the Selling Stockholder, the commissions paid or
discounts or concessions allowed by the Selling Stockholder to such
broker-dealer(s), and where applicable, that such broker-dealer(s) did not
conduct any investigation to verify the information set out in this Prospectus.
8
<PAGE> 12
Any Shares which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under that Rule rather than pursuant to this
Prospectus.
There can be no assurances that the Selling Stockholders will sell any
or all of the Shares offered by them hereunder.
All expenses of the registration of the Shares will be paid by the
Company.
LEGAL MATTERS
The validity of the Common Stock 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 Sheets as of December 31, 1994 and 1995 and the Statements
of Operations, Stockholders' Equity and Cash Flows for the period from August
19, 1994 (Commencement of Operations) to December 31, 1994 and for the year
ended 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.
9
<PAGE> 13
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the Company
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
Selling Stockholders.......................................................... 4
Certain Federal Income Tax Considerations..................................... 6
ERISA Investors............................................................... 8
Plan of Distribution.......................................................... 8
Legal Matters................................................................. 9
Experts....................................................................... 9
</TABLE>
1,649,486 Shares
Common Stock
RWT
REDWOOD TRUST, INC.
-------------
PROSPECTUS
-------------
January __, 1997
<PAGE> 14
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 3 (FORM S-8). INCORPORATION OF DOCUMENTS 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, June 30, 1996 and September
30, 1996;
(c) The Company's Current Report on Form 8-K filed on January 7,
1997 (Reg. No. 000-26436);
(d) 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; and
(e) The registration statement for the Company's Dividend
Reinvestment and Stock Purchase Plan on Form S-3, filed
December 17, 1996 (Reg. No. 333-18061).
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 the Prospectus
included in this registration statement and prior to the filing of a post
effective amendment indicating that the shares covered by the registration
statement have been sold, or deregistering all of the shares that, at the time
of such post-effective amendment, remain unsold, shall be deemed to be
incorporated by reference into the Prospectus and to be a part thereof from the
date of filing of such documents.
ITEM 4 (FORM S-8). DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5 (FORM S-8). INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6 (FORM S-8) AND ITEM 15 (FORM S-3). 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 Charter provides 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.
II-1
<PAGE> 15
The Maryland General Corporation Law (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 Charter contains 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.
ITEM 7 (FORM S-8). EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8 (FORM S-8) AND ITEM 16 (FORM S-3). EXHIBITS
3.3.1* Amended and Restated Bylaws of the Registrant, amended
December 13, 1996.
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)
10.14.2 Amended and Restated 1994 Executive and Non-Employee Director
Stock Option Plan
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 (included in signature page)
- -------------
* Incorporated by reference to the correspondingly numbered exhibit to the
current report on Form 8-K filed by the Registrant with the Securities and
Exchange Commission on January 7, 1997 (Reg. No. 000-26436).
ITEM 9 (FORM S-8) AND ITEM 17 (FORM S-3). 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.
II-2
<PAGE> 16
(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.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities begin
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 17
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-8 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
January 23, 1997.
REDWOOD TRUST, INC.
By: /s/ George E. Bull, III
--------------------------------------------------
George E. Bull, III
(Chairman of the Board and Chief Executive Officer)
POWER OF ATTORNEY
WE, THE UNDERSIGNED DIRECTORS AND OFFICERS OF REDWOOD TRUST, INC., DO
HEREBY CONSTITUTE AND APPOINT GEORGE E. BULL III, DOUGLAS B. HANSEN, FREDERICK
H. BORDEN AND VICKIE L. RATH OUR TRUE AND LAWFUL ATTORNEYS AND AGENTS, TO DO ANY
AND ALL ACTS AND THINGS IN OUR NAME AND BEHALF IN OUR CAPACITIES AS DIRECTORS,
OFFICERS AND TO EXECUTE ANY AND ALL INSTRUMENTS FOR US AND IN OUR NAMES IN THE
CAPACITIES INDICATED BELOW, WHICH SAID ATTORNEYS AND AGENTS MAY DEEM NECESSARY
OR ADVISABLE TO ENABLE SAID CORPORATION TO COMPLY WITH THE SECURITIES ACT OF
1933, AS AMENDED, AND ANY RULES, REGULATIONS AND REQUIREMENTS OF THE SECURITIES
AND EXCHANGE COMMISSION, IN CONNECTION WITH THIS REGISTRATION STATEMENT,
INCLUDING SPECIFICALLY, BUT WITHOUT LIMITATION, POWER AND AUTHORITY TO SIGN FOR
US OR ANY OF US IN OUR NAMES AND IN THE CAPACITIES INDICATED BELOW, ANY AND ALL
AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) HEREOF; AND WE DO HEREBY RATIFY
AND CONFIRM ALL THAT THE SAID ATTORNEYS AND AGENTS SHALL DO OR CAUSE TO BE DONE
BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS FORM
S-8 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 January 23, 1997
- --------------------------------
George E. Bull, III Executive Officer and Director
(Principal Executive Officer)
/s/ Douglas B. Hansen President, Chief Financial Officer January 23, 1997
- --------------------------------
Douglas B. Hansen and Director
(Principal Financial Officer)
/s/ Frederick H. Borden Vice Chairman of the Board, January 23, 1997
- --------------------------------
Frederick H. Borden Secretary and Director
/s/ Vickie L. Rath Vice President, Treasurer and January 23, 1997
- --------------------------------
Vickie L. Rath Controller (Principal Accounting
Officer)
/s/ Dan A. Emmett Director January 23, 1997
- --------------------------------
Dan A. Emmett
/s/ Thomas F. Farb Director January 23, 1997
- --------------------------------
Thomas F. Farb
/s/ Nello Gonfiantini Director January 23, 1997
- --------------------------------
Nello Gonfiantini
/s/ Charles J. Toeniskoetter Director January 23, 1997
- --------------------------------
Charles J. Toeniskoetter
</TABLE>
II-4
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT PAGE NO.
- ----------- ----------------------- --------
<S> <C> <C>
3.3.1* Amended and Restated Bylaws of the Registrant,
amended December 13, 1996 . . . . . . . . . . . . .
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) . . . . . . . . . . . . . . .
10.14.2 Amended and Restated 1994 Executive and Non-
Employee Director Stock Option Plan . . . . . . . .
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 (included in signature page). . .
- ---------
</TABLE>
* Incorporated by reference to the correspondingly numbered exhibit to
the current report on Form 8-K filed by the Registrant with the Securities
and Exchange Commission on January 7, 1997 (Reg. No. 000-26436).
II-5
<PAGE> 1
EXHIBIT 5.1
[Letterhead TOBIN & TOBIN]
January 23, 1997
The Board of Directors
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
Re: Registration Statement on Form S-8/S-3
relative to the Amended and Restated 1994 Executive
and Non-Employee Director Stock Option Plan, amended
December 13, 1996
Ladies and Gentlemen:
We have acted as your counsel in connection with the
registration under the Securities Act of 1933, as amended (the "Securities Act")
of the Amended and Restated 1994 Executive and Non-Employee Director Stock
Option Plan, amended December 13, 1996, by Redwood Trust, Inc., a Maryland
corporation (the "Company"), covering an aggregate of 1,649,486 shares of the
Company's common stock, par value $0.01 per share (the "Common Stock" or the
"Shares").
This opinion is delivered in accordance with the requirements
of Items 601(b)(5) and (23) of Regulation S-K under 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-8/S-3, relating to the
Shares, filed with the Securities and Exchange Commission (the "Commission")
under the Securities Act on or about the date hereof (together with all exhibits
thereto, the "Registration Statement"), (ii) the Prospectus for a portion of the
Shares and the Reoffer Prospectus included within the Registration Statement
covering the remaining Shares, (iii) the Charter of the Company, as amended,
(iv) the Bylaws of the Company in effect as of the date hereof, (v) resolutions
of the Board of Directors of the Company relating to the issuance and of the
Shares and the filing and effectiveness
<PAGE> 2
The Board of Directors
Redwood Trust, Inc.
January 23, 1997
Page 2
of the Registration Statement, adopted at a meeting on June 14, 1996, and (vi) a
specimen of the certificates representing the Shares. 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, dated on or about the date hereof.
Based upon and subject to the foregoing, we are of the opinion
that the Shares to be issued by the Company in the offering, described in the
Registration Statement, have been duly and validly authorized for issuance, and,
upon issuance and delivery of the Shares to the Underwriters against payment
therefor in accordance with the terms of the Underwriting Agreement, the Shares
will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the
Commission as Exhibit 5.1 to Form S-8/S-3 and its incorporation by reference as
an exhibit to 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
Commission promulgated thereunder.
Very truly yours,
/s/ Tobin & Tobin
<PAGE> 1
EXHIBIT 5.2
[PIPER & MARBURY LETTERHEAD]
January 23, 1997
Redwood Trust, Inc.
591 Redwood Highway, Suite 3100
Mill Valley, California 94941
Registration Statement on Form S-8/S-3
Ladies and Gentlemen:
We have acted as special 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"), of 1,649,486 shares of the
Common Stock, par value $.01 per share, of the Company (the "Shares") pursuant
to a Registration Statement of the Company on Form S-8/S-3 (the "Registration
Statement") filed with the Securities and Exchange Commission (the
"Commission"). The Shares (i) have been or may be issued pursuant to the
Company's Amended and Restated 1994 Executive and Non-Employee Director Stock
Option Plan (the "Plan") and (ii) once issued pursuant to options granted under
the Plan to certain selling stockholders named in the Registration Statement
(the "Selling Stockholders") may reoffered and resold by the Selling
Stockholders.
In this capacity, we have examined the Registration Statement, the
Charter and By-Laws of the Company, the Plan, the proceedings of the Board of
Directors of the Company relating to the issuance of the Shares issued and to be
issued pursuant to the Plan, a Certificate of the Secretary of the Company dated
January 23, 1997, and such other statutes, certificates, instruments, and
documents relating to the Company and matters of law as we have deemed necessary
to the issuance of this opinion. In such examination, we have assumed, without
independent investigation, the genuineness of all signatures, the legal capacity
of all individuals who have executed any of the aforesaid documents, the
authenticity of all documents submitted to us as originals, the conformity with
originals of all documents submitted to us as copies (and the authenticity of
the originals of such copies), and all public records reviewed are accurate and
complete. As to factual matters, we have relied on the Certificate of the
Secretary and have not
<PAGE> 2
Redwood Trust, Inc.
January 23, 1997
Page 2
independently verified the matters stated therein. We assume that the Company
will have at the time of exercise of each option granted under the Plan at least
that number of authorized but unissued shares of Common Stock of the Company
equal to the number of shares then being exercised under such option.
Based upon the foregoing and having regard for such legal
considerations as we deem relevant, we are of the opinion and so advise you that
the Shares issued or to be issued by the Company pursuant to the Plan have been
duly and validly authorized and, to the extent issued are, or when issued and
delivered as contemplated in the Registration Statement and in accordance with
the Plan, will be, validly issued, fully paid, and non-assessable.
The opinion expressed herein is solely for (i) the use of the Company
in connection with the Registration Statement, and (ii) the use of Tobin & Tobin
in giving their legality opinion to be filed as an exhibit to the Registration
Statement. This opinion may not be relied on by any other person or in any other
connection without our prior written approval. This opinion is limited to the
matters set forth herein, and no other opinion should be inferred beyond the
matters expressly stated.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the Prospectus included in the Registration Statement. In giving our
consent, we do not thereby admit that we are in the category of persons whose
consent is required under Section 7 of the Act or the rules and regulations of
the Commission thereunder.
Very truly yours,
/s/ Piper & Marbury L.L.P.
<PAGE> 1
EXHIBIT 8.1
[Giancarlo & Gnazzo Letterhead]
January 23, 1997
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
Re: Redwood Trust, Inc. Registration Statement for Amended
and Restated 1994 Executive and Non-Employee Director
Stock Option Plan
Dear Ladies and Gentlemen:
You have requested our opinion in connection with the Form S-8/S-3
Registration Statement, dated January 23, 1997 (the "Registration Statement")
being filed by Redwood Trust, Inc. (the "Company") with respect to its Amended
and Restated 1994 Executive and Non-Employee Director Stock Option Plan.
We have acted as your special tax counsel in connection with the
Registration Statement and Prospectus related thereto, and have assisted in the
preparation of the tax summary for each such document. In formulating our
opinions, we have reviewed (i) the Registration Statement and the Prospectus
Supplement, (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 the date
hereof, with respect to certain matters of Maryland law.
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
<PAGE> 2
Redwood Trust, Inc.
January 23, 1997
Page 2
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 September 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 the Prospectus
related thereto, and as represented to us 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.
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 Registration Statement.
Very truly yours,
Giancarlo & Gnazzo
A Professional Corporation
<PAGE> 1
EXHIBIT 10.14.2
REDWOOD TRUST, INC.
AMENDED AND RESTATED
1994 EXECUTIVE AND NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN
(LAST AMENDED DECEMBER 13, 1996)
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Redwood Trust, Inc. Amended and Restated
1994 Executive and Non-Employee Director Stock Option Plan (the "Plan"). The
Plan was adopted by the Board on June 23, 1994, subject to the approval of the
Company stockholders, which approval was obtained on June 23, 1994. The Board
approved amendments to the Plan on March 8, 1996 which became effective upon
approval by the Company's stockholders on June 14, 1996. The Board approved
additional non-material amendments on December 13, 1996, which became effective
on such date. The purpose of the Plan is to enable the Company and its
Subsidiaries to obtain and retain competent personnel who will contribute to the
Company's success by their ability, ingenuity and industry, to give the
Company's non-employee directors a proprietary interest in the Company and to
provide incentives to the participating directors, officers and other key
employees, and agents and consultants that are linked directly to increases in
stockholder value and will therefore inure to the benefit of all stockholders of
the Company.
For purposes of the Plan, the following terms shall be defined
as set forth below:
(1) "Accrued DERs" means DERs with the accrual rights described in
Section 5(11).
(2) "Administrator" means the Board, or if the Board does not
administer the Plan, the Committee in accordance with Section 2.
(3) "Board" means the Board of Directors of the Company.
(4) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
(5) "Committee" means the Compensation Committee of the Board, which
shall be composed entirely of individuals who meet the qualifications to be a
"Non-Employee Director" as defined in Rule 16b-3 ("Rule 16b-3) as promulgated by
the Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934 (the "Act"), and as such Rule may be amended from time to
time, or any successor definition adopted by the Commission, or any other
Committee the Board may subsequently appoint to administer the Plan. If at any
time the Board shall not administer the Plan, then the functions of the Board
specified in the Plan shall be exercised by the Committee.
(6) "Company" means Redwood Trust, Inc., a corporation organized under
the laws of the State of Maryland (or any successor corporation).
<PAGE> 2
(7) "Current-pay DERs" means DERs with the current-pay rights described
in Section 5(11).
(8) "DERs" shall mean Accrued DERs and Current-pay DERs.
(9) "Deferred Stock" means an award granted pursuant to Section 7 of
the right to receive Stock at the end of a specified deferral period.
(10) "Disability" means permanent and total disability as determined
under the Company's disability program or policy.
(11) "Effective Date" shall mean the date provided pursuant to Section
12.
(12) "Eligible Employee" means an employee of the Company or any
Subsidiary eligible to participate in the Plan pursuant to Section 4.
(13) "Eligible Non-Employee Director" means a member of the Board or
the board of directors of any Subsidiary who is not a bona fide employee of the
Company or any Subsidiary and who is eligible to participate in the Plan
pursuant to Section 5A.
(14) "Fair Market Value" means, as of any given date, with respect to
any awards granted hereunder, at the discretion of the Administrator and subject
to such limitations as the Administrator may impose, (A) the closing sale price
of the Stock on the next preceding business day as reported in the Western
Edition of the Wall Street Journal Composite Tape, or (B) the average of the
closing price of the Stock on each day on which the Stock was traded over a
period of up to twenty trading days immediately prior to such date, or (C) if
the Stock is not publicly traded, the fair market value of the Stock as
otherwise determined by the Administrator in the good faith exercise of its
discretion.
(15) "Incentive Stock Option" means any Stock Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(16) "Limited Stock Appreciation Right" means a Stock Appreciation
Right that can be exercised only in the event of a "Change of Control" (as
defined in Section 10 below).
(17) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3.
(18) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option, including any Stock Option that provides (as of the time
such option is granted) that it will not be treated as an Incentive Stock
Option.
(19) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.
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(20) "Participant" means any Eligible Employee or any consultant or
agent of the Company or any Subsidiary selected by the Committee, pursuant to
the Administrator's authority in Section 2, to receive grants of Stock Options,
DERs, Stock Appreciation Rights, Limited Stock Appreciation Rights, Restricted
Stock awards, Deferred Stock awards, Performance Shares or any combination of
the foregoing, or any Eligible Non-Employee Director eligible to receive grants
of Non-Qualified Stock Options and DERs pursuant to Section 5A below.
(21) "Performance Share" means an award of shares of Stock granted
pursuant to Section 7 that is subject to restrictions based upon the attainment
of specified performance objectives.
(22) "Restricted Stock" means an award granted pursuant to Section 7 of
shares of Stock subject to restrictions that will lapse with the passage of
time.
(23) "Stock" means the common stock, $0.01 par value, of the Company.
(24) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 to receive an amount equal to the difference between (A)
the Fair Market Value, as of the date such Stock Appreciation Right or portion
thereof is surrendered, of the shares of Stock covered by such right or such
portion thereof, and (B) the aggregate exercise price of such right or such
portion thereof.
(25) "Stock Option" means an option to purchase shares of Stock granted
pursuant to Section 5 or Section 5A.
(26) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board or by a Committee appointed
by the Board, which shall serve at the pleasure of the Board; provided, however,
that at all times when the Company is subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended, the Plan shall be administered
by the Committee appointed by the Board.
The Administrator shall have the power and authority to grant to
Eligible Employees and consultants or agents of the Company or any Subsidiary,
pursuant to the terms of the Plan: (a) Stock Options (with or without DERs), (b)
Stock Appreciation Rights or Limited Stock Appreciation Rights, (c) Restricted
Stock, (d) Deferred Stock, (e) Performance Shares or (f) any combination of the
foregoing.
In particular, the Administrator shall have the authority:
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<PAGE> 4
(a) to select those employees of the Company or any Subsidiary who
shall be Eligible Employees;
(b) to determine whether and to what extent Stock Options (with or
without DERs), Stock Appreciation Rights, Limited Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Performance Shares or a combination of the
foregoing, are to be granted to Eligible Employees or any consultant or agent of
the Company or any Subsidiary hereunder;
(c) to determine the number of shares to be covered by each such award
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited
to, (x) the restricted period applicable to Restricted or Deferred Stock awards
and the date or dates on which restrictions applicable to such Restricted or
Deferred Stock shall lapse during such period, and (y) the performance goals and
periods applicable to the award of Performance Shares); and
(e) to determine the terms and conditions, not inconsistent with the
terms of the Plan, which shall govern all written instruments evidencing the
Stock Options, DERs, Stock Appreciation Rights, Limited Stock Appreciation
Rights, Restricted Stock, Deferred Stock, Performance Shares or any combination
of the foregoing.
The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to interpret
the terms and provisions of the Plan and any award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.
All decisions made by the Administrator pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company, any
Subsidiaries and the Participants.
Notwithstanding anything to the contrary herein, no award hereunder may
be made to any Participant to the extent that, following such award, the shares
subject or potentially subject to such Participant's control (including, but not
limited to, (i) shares of the Company's equity stock owned by the Participant,
(ii) Stock Options, whether or not then exercisable, held by the Participant to
purchase additional such shares, (iii) Restricted Stock, Deferred Stock and
Performance Share awards to the Participant, whether or not then vested, and
(iv) Accrued DERs credited to the Participant) would constitute more than 9.8%
of the outstanding capital stock of the Company.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under the Plan shall be 500,000; provided, however, that from and after such
time as the number of outstanding shares of Stock as reflected on the Company's
quarterly or year-end balance sheet exceeds 6,000,000 (including treasury shares
but not including adjustments in the event of changes in the
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<PAGE> 5
corporate structure of the Company as provided below in this Section 3), the
total number of shares of Stock reserved and available for issuance under the
Plan shall automatically be increased so as to equal fifteen (15) percent of the
number of then outstanding shares of Stock, and provided further, that no more
than 500,000 shares of Stock shall be cumulatively available for Incentive Stock
Options. At all times, the number of shares reserved and available for issuance
hereunder as so determined from time to time shall be decreased by virtue of
awards granted and outstanding or exercised hereunder.
To the extent that (i) a Stock Option or DER expires or is otherwise
terminated without being exercised, or (ii) any shares of Stock subject to any
Restricted Stock, Deferred Stock or Performance Share award granted hereunder
are forfeited, such shares shall again be available for issuance in connection
with future awards under the Plan. If any shares of Stock have been pledged as
collateral for indebtedness incurred by a Participant in connection with the
exercise of a Stock Option and such shares are returned to the Company in
satisfaction of such indebtedness, such shares shall again be available for
issuance in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, Stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment may be made in (i) the
aggregate number of shares reserved for issuance under the Plan, and (ii) the
kind, number and option price of shares subject to outstanding Stock Options and
DERs granted under the Plan as may be determined by the Administrator, in its
sole discretion, provided that the number of shares subject to any award shall
always be a whole number. Such other substitutions or adjustments shall be made
as may be determined by the Administrator, in its sole discretion; provided,
however, that with respect to Incentive Stock Options, such adjustment shall be
made in accordance with Section 424 of the Code. An adjusted option price shall
also be used to determine the amount payable by the Company upon the exercise of
any Stock Appreciation Right or Limited Stock Appreciation Right associated with
any Stock Option.
The aggregate number of shares of Stock for which Stock Options or
Stock Appreciation Rights may be granted to any individual during any calendar
year may not, subject to adjustment as provided in this Section 3, exceed 75% of
the shares of Stock reserved for the purposes of the Plan in accordance with the
provisions of this Section 3.
SECTION 4. ELIGIBILITY.
Officers and other key employees of the Company or Subsidiaries who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company or its Subsidiaries and consultants and agents of
the Company or its Subsidiaries, shall be eligible to be granted Stock Options,
DERs, Stock Appreciation Rights, Limited Stock Appreciation Rights, Restricted
Stock awards, Deferred Stock awards or Performance Shares hereunder. The
Participants under the Plan shall be selected from time to time by the
Administrator, in its sole discretion, from among the Eligible Employees and
consultants and agents recommended by the senior management of the Company, and
the Administrator shall determine, in its sole discretion, the number of shares
covered by each award; provided, however, that Eligible Non- Employee Directors
shall only be eligible to receive Stock Options as provided in Section 5A.
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<PAGE> 6
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other awards
granted under the Plan, including DERs as described in Section 5(11). Any Stock
Option granted under the Plan shall be in such form as the Administrator may
from time to time approve, and the provisions of Stock Option awards need not be
the same with respect to each optionee. Recipients of Stock Options shall enter
into a stock option agreement with the Company, in such form as the
Administrator shall determine, which agreement shall set forth, among other
things, the exercise price of the option, the term of the option and provisions
regarding exercisability of the option granted thereunder.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options.
The Administrator shall have the authority under this Section 5 to
grant any optionee (except Eligible Non-Employee Directors) Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options (in each
case with or without DERs, Stock Appreciation Rights or Limited Stock
Appreciation Rights), provided, however, that Incentive Stock Options may not be
granted to any individual who is not an employee of the Company or its
Subsidiaries. To the extent that any Stock Option does not qualify as an
Incentive Stock Option, it shall constitute a separate Non-Qualified Stock
Option. More than one option may be granted to the same optionee and be
outstanding concurrently hereunder.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Administrator in its sole discretion
at the time of grant but shall not, in the case of Incentive Stock Options, be
less than 100% of the Fair Market Value of the Stock on such date, and shall
not, in any event, be less than the par value of the Stock. The option price per
share of Stock purchasable under a Non-Qualified Stock Option may be less than
100% of such Fair Market Value. If an employee owns or is deemed to own (by
reason of the attribution rules applicable under Section 425(d) of the Code)
more than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation or Subsidiary and an Incentive Stock Option is
granted to such employee, the option price of such Incentive Stock Option (to
the extent required by the Code at the time of grant) shall be no less than 110%
of the Fair Market Value of the Stock on the date such Incentive Stock Option is
granted.
(2) Option Term. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; provided, however, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
425(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or Subsidiary and an Incentive
Stock Option is granted to such employee, the term of such Incentive Stock
Option (to the extent
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<PAGE> 7
required by the Code at the time of grant) shall be no more than five years from
the date of grant.
(3) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant; provided, however, that, except as provided
herein or unless otherwise determined by the Administrator at or after grant,
Stock Options shall become exercisable as to 25% of the shares subject to such
Stock Option on the first anniversary of the date of grant of the Stock Option,
and as to an additional 25% on each of the next three anniversaries of the date
of grant. To the extent not exercised, installments shall accumulate and be
exercisable in whole or in part at any time after becoming exercisable but not
later than the date the Stock Option expires. The Administrator may provide, in
its discretion, that any Stock Option shall be exercisable only in installments,
and the Administrator may waive such installment exercise provisions at any time
in whole or in part based on such factors as the Administrator may determine, in
its sole discretion.
(4) Method of Exercise. Subject to Section 5(3), Stock Options may be
exercised in whole or in part at any time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price in cash or its
equivalent as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made in the form of unrestricted Stock already owned by the optionee, or, in the
case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Performance Shares subject to an award hereunder (based, in each case, on the
Fair Market Value of the Stock on the date the option is exercised); provided,
however, that in the case of an Incentive Stock Option, the right to make
payment in the form of already owned shares may be authorized only at the time
of grant. Any payment in the form of stock already owned by the optionee may be
effected by use of an attestation form approved by the Administrator. If payment
of the option exercise price of a Non-Qualified Stock Option is made in whole or
in part in the form of Restricted Stock or Performance Shares, the shares
received upon the exercise of such Stock Option (to the extent of the number of
shares of Restricted Stock or Performance Shares surrendered upon exercise of
such Stock Option) shall be restricted in accordance with the original terms of
the Restricted Stock or Performance Share award in question, except that the
Administrator may direct that such restrictions shall apply only to that number
of shares equal to the number of shares surrendered upon the exercise of such
option. An optionee shall generally have the rights to dividends and other
rights of a stockholder with respect to shares subject to the option only after
the optionee has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in paragraph
(1) of Section 11.
The Administrator may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to a
grant of a new Stock Option. Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted; provided, however, that should the Administrator so
require, the number of shares subject to such new Stock Option shall not be
greater than the number of shares subject to the surrendered Stock Option. Upon
their surrender, Stock Options
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<PAGE> 8
shall be canceled and the shares previously subject to such canceled Stock
Options shall again be available for grants of Stock Options and other awards
hereunder.
(5) Loans. The Company may make loans available to Stock Option holders
in connection with the exercise of outstanding options granted under the Plan,
as the Administrator, in its discretion, may determine. Such loans shall (i) be
evidenced by promissory notes entered into by the Stock Option holders in favor
of the Company, (ii) be subject to the terms and conditions set forth in this
Section 5(5) and such other terms and conditions, not inconsistent with the
Plan, as the Administrator shall determine, and (iii) bear interest, if any, at
such rate as the Administrator shall determine. In no event may the principal
amount of any such loan exceed the sum of (x) the exercise price less the par
value of the shares of Stock covered by the option, or portion thereof,
exercised by the holder, and (y) any federal, state, and local income tax
attributable to such exercise. The initial term of the loan, the schedule of
payments of principal and interest under the loan, the extent to which the loan
is to be with or without recourse against the holder with respect to principal
or interest and the conditions upon which the loan will become payable in the
event of the holder's termination of employment shall be determined by the
Administrator; provided, however, that the term of the loan, including
extensions, shall not exceed seven years. Unless the Administrator determines
otherwise, when a loan is made, shares of Stock having a Fair Market Value at
least equal to the principal amount of the loan shall be pledged by the holder
to the Company as security for payment of the unpaid balance of the loan, and
such pledge shall be evidenced by a pledge agreement, the terms of which shall
be determined by the Administrator, in its discretion; provided, however, that
each loan shall comply with all applicable laws, regulations and rules of the
Board of Governors of the Federal Reserve System and any other governmental
agency having jurisdiction.
(6) Limits on Transferability of Options.
(a) Subject to Section 5(6)(b), no Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a "qualified domestic relations order," as such
term is defined in the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or in accordance with the terms of a
qualified domestic relations order.
(b) The Administrator may, in its discretion, authorize all or
a portion of the options to be granted to an optionee to be on terms which
permit transfer by such optionee to (i) the spouse, qualified domestic partner,
children or grandchildren of the optionee and any other persons related to the
optionee as may be approved by the Administrator ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Immediate Family
Members, (iii) a partnership or partnerships in which such Immediate Family
Members are the only partners, or (iv) any other persons or entities as may be
approved by the Administrator, provided that (x) there may be no consideration
for any transfer unless approved by the Administrator, (y) the stock option
agreement pursuant to which such options are granted must be approved by the
Administrator, and must expressly provide for transferability in a manner
consistent with this Section 5(6)(b), and (z) subsequent transfers of
transferred options shall be prohibited except those in accordance with Section
5(6)(a) or expressly approved by the
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Administrator. Following transfer, any such options shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that, except for purposes of Sections 5(7), (8), (9), (10)
and 11(3) hereof, the terms "optionee," "Stock Option holder" and "Participant"
shall be deemed to refer to the transferee. The events of termination of
employment under Sections 5(7), (8) and (9) hereof shall continue to be applied
with respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods specified
under such sections unless the option agreement governing such options otherwise
provides. Notwithstanding the transfer, the original optionee will continue to
be subject to the provisions of Section 11(3) regarding payment of taxes,
including the provisions entitling the Company to deduct such taxes from amounts
otherwise due to such optionee. Any transfer of a Stock Option that was
originally granted with DERs related thereto shall automatically include the
transfer of such DERs, any attempt to transfer such Stock Option separately from
such DERs shall be void, and such DERs shall continue in effect according to
their terms. "Qualified domestic partner" for the purpose of this Section
5(6)(b) shall mean a domestic partner living in the same household as the
optionee and registered with, certified by or otherwise acknowledged by the
county or other applicable governmental body as a domestic partner or otherwise
establishing such status in any manner satisfactory to the Administrator. Stock
options granted prior to December 1, 1996 may be amended to provide for their
transferability, subject to the foregoing conditions.
(7) Termination by Death. If an optionee's employment with the Company
or any Subsidiary terminates by reason of death, the Stock Option may thereafter
be immediately exercised, to the extent then exercisable (or on such accelerated
basis as the Administrator shall determine at or after grant), by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, for a period of twelve months (or such shorter period as the
Administrator shall specify at grant) from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is shorter.
(8) Termination by Reason of Disability. If an optionee's employment
with the Company or any Subsidiary terminates by reason of Disability, any Stock
Option held by such optionee may thereafter be exercised, to the extent it was
exercisable at the time of such termination (or on such accelerated basis as the
Administrator shall determine at the time of grant), for a period of twelve
months (or such shorter period as the Administrator shall specify at grant) from
the date of such termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is shorter; provided, however, that,
if the optionee dies within such twelve-month period (or such shorter period as
the Administrator shall specify at grant) and prior to the expiration of the
stated term of such Stock Option, any unexercised Stock Option held by such
optionee shall thereafter be exercisable to the extent to which it was
exercisable at the time of termination for a period of twelve months (or such
shorter period as the Administrator shall specify at grant) from the time of
death or until the expiration of the stated term of such Stock Option, whichever
period is shorter. In the event of a termination of employment by reason of
Disability, if an Incentive Stock Option is exercised after the expiration of
the applicable exercise periods under Section 422 of the Code, such Stock Option
shall thereafter be treated as a Non-Qualified Stock Option.
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(9) Other Termination. Except as otherwise determined by the
Administrator, if an optionee's employment with the Company or any Subsidiary
terminates for any reason other than death or Disability, the Stock Option may
be exercised for a period of three months from the date of such termination, or
until the expiration of the stated term of such Stock Option, whichever period
is shorter.
(10) Annual Limit on Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of shares of Stock with respect to which Incentive Stock
Options granted to an Optionee under this Plan and all other option plans of the
Company, its Parent Corporation or any Subsidiary become exercisable for the
first time by the Optionee during any calendar year exceeds $100,000, such Stock
Options shall be treated as Non-Qualified Stock Options.
(11) DERs. The Administrator shall have the discretion to grant DERs in
conjunction with grants of Stock Options pursuant to this Section 5. DERs may be
granted in either of two forms, "Current-pay DERs" and "Accrued DERs" and the
Administrator may condition the payment or accrual of amounts in respect thereof
subject to satisfaction of such performance objectives as the Administrator may
specify at the time of grant. Assuming satisfaction of any applicable
conditions, Current-pay DERs shall be paid concurrently with any dividends or
distributions paid on the Stock during the time the related Stock Options are
outstanding in an amount equal to the cash dividend (or Stock or other property
hereby distributed) per share being paid on the Stock times the number of shares
subject to the related Stock Options. Current-pay DERs are payable in cash,
Stock or such other property as may be distributed to stockholders. Accrued DERs
may be accrued in respect of cash dividends only or cash dividends and the value
of any Stock or other property distributed to stockholders, as the Administrator
shall determine at the time of grant. Assuming satisfaction of any applicable
conditions, Accrued DERs shall be accrued with respect to the related Stock
Options outstanding as of the date dividends are declared on the Company's Stock
in accordance with the following formula:
(A x B) / C
under which "A" equals the number of shares subject to such Stock Options, "B"
equals the cash dividend per share or the value per share of the Stock or other
property being distributed, as the case may be, and "C" equals the Fair Market
Value per share of Stock on the dividend payment date. The Accrued DERs shall
represent shares of Stock which shall be issuable to the holder of the related
Stock Option proportionately as the holder exercises the Stock Option to which
the Accrued DERs relate, rounded down to the nearest whole number of shares.
DERs shall expire upon the expiration of the Stock Options to which they relate.
The Administrator shall specify at the time of grant whether dividends shall be
payable or credited on Accrued DERs. Notwithstanding anything to the contrary
herein, Accrued DERs granted with respect to Stock Options shall be accrued only
to the extent of the number of shares of stock then reserved and available for
issuance under the Plan in excess of the number of shares subject to issuance
pursuant to outstanding Stock Option, Accrued DER, Stock Appreciation Right,
Limited Stock Appreciation Right, Deferred Stock or Performance Share awards.
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SECTION 5A. STOCK OPTIONS FOR ELIGIBLE NON-EMPLOYEE DIRECTORS.
This Section 5A shall apply only to automatic grants of Stock Options
to Eligible Non-Employee Directors.
(1) Each Eligible Non-Employee Director shall automatically be granted,
upon becoming a director of the Company or any Subsidiary, a Non-Qualified Stock
Option to purchase 5,000 shares of Stock. In addition, on the day after the
annual meeting of stockholders of the Company to be held in the calendar year
1995, and on the day after each annual stockholders' meeting of the Company
thereafter during the term of the Plan, each Eligible Non-Employee Director of
the Company shall be granted a Non-Qualified Stock Option to purchase 2,500
shares of Stock, together with Accrued DERs with respect to such Non-Qualified
Stock Option. The option price per share of Stock purchasable under such Stock
Option shall be 100% of the Fair Market Value on the date of grant. Such Stock
Option shall become exercisable as to 25% of the shares subject to such Stock
Option on the first anniversary of the date of grant of the Stock Option, and as
to an additional 25% of the shares subject to such Stock Option on each of the
next three anniversaries of the date of grant. To the extent not exercised,
installments shall accumulate and be exercisable in whole or in part at any time
after becoming exercisable but not later than the date the Stock Option expires.
Exercise shall be by payment in full of the purchase price in cash and no stock
option shall be exercisable more than ten years after the date of grant. The
aggregate number of shares of Stock that may be granted to Eligible Non-Employee
Directors pursuant to the Plan may not exceed 180,000 shares.
(2) Eligible Non-Employee Directors who receive grants of Stock Options
shall enter into a stock option agreement with the Company, which agreement
shall set forth, among other things, the exercise price of the option, the term
of the option and provisions regarding exercisability of the option granted
thereunder. The Stock Options granted under this section shall be Non-Qualified
Stock Options.
(3) Non-Qualified Stock Options granted to Eligible Non-Employee
Directors hereunder shall be transferable only to the extent provided in
Sections 5(6)(a) and (b).
(4) Accrued DERs shall be credited with respect to such Non-Qualified
Stock Options in accordance with the provisions of Section 5(11) above.
(5) The Board may not amend, alter or discontinue the provisions of
this Section 5A more than once every six months other than to comport with
changes in the Code, ERISA or the rules thereunder.
SECTION 6. STOCK APPRECIATION RIGHTS AND LIMITED STOCK
APPRECIATION RIGHTS.
(1) Grant and Exercise. Stock Appreciation Rights and Limited Stock
Appreciation Rights may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of any Stock Option granted under the Plan
("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights
may be granted either at or after the time of the grant of such
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Stock Option. In the case of an Incentive Stock Option, Related Rights may be
granted only at the time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted in conjunction
with a given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise provided by the Administrator at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Stock Option shall only be reduced if and to the extent that the number of
shares covered by the exercise or termination of the related Stock Option
exceeds the number of shares not covered by the Stock Appreciation Right.
A Related Right may be exercised by an optionee, in accordance with
paragraph (2) of this Section 6, by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(2) of this Section 6. Stock Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the Related Rights have
been so exercised.
(2) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Administrator, including the
following:
(a) Stock Appreciation Rights that are Related Rights
("Related Stock Appreciation Rights") shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate shall be
exercisable in accordance with the provisions of Section 5 and this Section 6;
provided, however, that no Related Stock Appreciation Right shall be exercisable
during the first six months of its term, except that this additional limitation
shall not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(b) Upon the exercise of a Related Stock Appreciation Right,
an optionee shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or in some combination of cash and
shares of Stock) equal in value to the excess of the Fair Market Value of one
share of Stock as of the date of exercise over the option price per share
specified in the related Stock Option multiplied by the number of shares of
Stock in respect of which the Related Stock Appreciation Right is being
exercised, with the Administrator having the right to determine the form of
payment.
(c) Related Stock Appreciation Rights shall be transferable or
exercisable only when and to the extent that the underlying Stock Option would
be transferable or exercisable under paragraph (6) of Section 5.
(d) Upon the exercise of a Related Stock Appreciation Right,
the Stock Option or part thereof to which such Related Stock Appreciation Right
is related shall be deemed to have been exercised for the purpose of the
limitation set forth in Section 3 on the number of shares of Stock to be issued
under the Plan.
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(e) A Related Stock Appreciation Right granted in connection
with an Incentive Stock Option may be exercised only if and when the Fair Market
Value of the Stock subject to the Incentive Stock Option exceeds the exercise
price of such Stock Option.
(f) Stock Appreciation Rights that are Free Standing Rights
("Free Standing Stock Appreciation Rights") shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant; provided, however, that no Free Standing Stock
Appreciation Right shall be exercisable during the first six months of its term,
except that this limitation shall not apply in the event of death or Disability
of the recipient of the Free Standing Stock Appreciation Right prior to the
expiration of such six-month period.
(g) The term of each Free Standing Stock Appreciation Right
shall be fixed by the Administrator, but no Free Standing Stock Appreciation
Right shall be exercisable more than ten years after the date such right is
granted.
(h) Upon the exercise of a Free Standing Stock Appreciation
Right, a recipient shall be entitled to receive up to, but not more than, an
amount in cash or that number of shares of Stock (or any combination of cash or
shares of Stock) equal in value to the excess of the Fair Market Value of one
share of Stock as of the date of exercise over the price per share specified in
the Free Standing Stock Appreciation Right (which price shall be no less than
100% of the Fair Market Value of the Stock on the date of grant) multiplied by
the number of shares of Stock with respect to which the right is being
exercised, with the Administrator having the right to determine the form of
payment.
(i) Free Standing Stock Appreciation Rights shall be
transferable or exercisable subject to the provisions governing the
transferability and exercisability of Stock Options set forth in paragraphs (3)
and (6) of Section 5.
(j) In the event of the termination of an employee who has
been granted one or more Free Standing Stock Appreciation Rights, such rights
shall be exercisable to the same extent that a Stock Option would have been
exercisable in the event of the termination of the optionee.
(k) Limited Stock Appreciation Rights may only be exercised
within the 30-day period following a "Change of Control" (as defined in Section
10 below), and, with respect to Limited Stock Appreciation Rights that are
Related Rights ("Related Limited Stock Appreciation Rights"), only to the extent
that the Stock Options to which they relate shall be exercisable in accordance
with the provisions of Section 5 and this Section 6; provided, however, that no
Related Limited Stock Appreciation Right shall be exercisable during the first
six months of its term, except that this additional limitation shall not apply
in the event of death or Disability of the optionee prior to the expiration of
such six-month period.
(l) Upon the exercise of a Limited Stock Appreciation Right,
the recipient shall be entitled to receive an amount in cash equal in value to
the excess of the "Change of Control Price" (as defined in Section 10) of one
share of Stock as of the date of exercise over (A) the
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option price per share specified in the related Stock Option, or (B) in the case
of a Limited Stock Appreciation Right which is a Free Standing Stock
Appreciation Right, the price per share specified in the Free Standing Stock
Appreciation Right, such excess to be multiplied by the number of shares in
respect of which the Limited Stock Appreciation Right shall have been exercised.
(m) For the purpose of the limitation set forth in Section 3
on the number of shares to be issued under the Plan, the grant or exercise of
Free Standing Stock Appreciation Rights shall be deemed to constitute the grant
or exercise, respectively, of Stock Options with respect to the number of shares
of Stock with respect to which such Free Standing Stock Appreciation Rights were
so granted or exercised.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND
PERFORMANCE SHARES.
(1) General. Restricted Stock, Deferred Stock or Performance Share
awards may be issued either alone or in addition to other awards granted under
the Plan. The Administrator shall determine the Eligible Employees to whom, and
the time or times at which, grants of Restricted Stock, Deferred Stock or
Performance Share awards shall be made; the number of shares to be awarded; the
price, if any, to be paid by the recipient of Restricted Stock, Deferred Stock
or Performance Share awards; the Restricted Period (as defined in Section 7(3))
applicable to Restricted Stock or Deferred Stock awards; the performance
objectives applicable to Performance Share or Deferred Stock awards; the date or
dates on which restrictions applicable to such Restricted Stock or Deferred
Stock awards shall lapse during such Restricted Period; and all other conditions
of the Restricted Stock, Deferred Stock and Performance Share awards. The
Administrator may also condition the grant of Restricted Stock, Deferred Stock
awards or Performance Shares upon the exercise of Stock Options, or upon such
other criteria as the Administrator may determine, in its sole discretion. The
provisions of Restricted Stock, Deferred Stock or Performance Share awards need
not be the same with respect to each recipient.
(2) Awards and Certificates. The prospective recipient of a Restricted
Stock, Deferred Stock or Performance Share award shall not have any rights with
respect to such award, unless and until such recipient has executed an agreement
evidencing the award (a "Restricted Stock Award Agreement," "Deferred Stock
Award Agreement," or "Performance Share Award Agreement," as appropriate) and
delivered a fully executed copy thereof to the Company, within a period of sixty
days (or such other period as the Administrator may specify) after the award
date. Except as otherwise provided below in this Section 7(2), (i) each
Participant who is awarded Restricted Stock or Performance Shares shall be
issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such award, substantially in the
following form:
"The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
Redwood Trust, Inc. Amended and Restated 1994 Executive and Non-Employee
Director Stock Option Plan and a Restricted Stock
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Award Agreement or Performance Share Award Agreement entered into between the
registered owner and Redwood Trust, Inc. Copies of such Plan and Agreement are
on file in the offices of Redwood Trust, Inc."
The Company shall require that the stock certificates evidencing such
shares be held in the custody of the Company until the restrictions thereon
shall have lapsed, and that, as a condition of any Restricted Stock award or
Performance Share award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such award.
(3) Restrictions and Conditions. The Restricted Stock, Deferred Stock
and Performance Share awards granted pursuant to this Section 7 shall be subject
to the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the Restricted
Stock, Deferred Stock or Performance Share award agreement, during such period
as may be set by the Administrator commencing on the grant date (the "Restricted
Period"), the Participant shall not be permitted to sell, transfer, pledge or
assign shares of Restricted Stock, Performance Shares or Deferred Stock awarded
under the Plan; provided, however, that the Administrator may, in its sole
discretion, provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part based on such factors
and such circumstances as the Administrator may determine, in its sole
discretion, including, but not limited to, the attainment of certain performance
related goals, the Participant's termination, death or Disability or the
occurrence of a "Change of Control" as defined in Section 10.
(b) Except as provided in paragraph (3)(a) of this Section 7,
the Participant shall have, with respect to the shares of Restricted Stock or
Performance Shares, all of the rights of a stockholder of the Company, including
the right to vote the shares, and the right to receive any dividends thereon
during the Restricted Period. With respect to Deferred Stock awards, the
Participant shall generally not have the rights of a stockholder of the Company,
including the right to vote the shares during the Restricted Period; provided,
however, that dividends declared during the Restricted Period with respect to
the number of shares covered by a Deferred Stock award shall be paid to the
Participant. Certificates for shares of unrestricted Stock shall be delivered to
the Participant promptly after, and only after, the Restricted Period shall
expire without forfeiture in respect of such shares covered by the award of
Restricted Stock, Performance Shares or Deferred Stock, except as the
Administrator, in its sole discretion, shall otherwise determine.
(c) Subject to the provisions of the Restricted Stock,
Deferred Stock or Performance Share award agreement and this Section 7, upon
termination of employment for any reason during the Restricted Period, all
shares subject to any restriction as of the date of such termination shall be
forfeited by the Participant, and the Participant shall only receive the amount,
if any, paid by the Participant for such Restricted Stock or Performance Shares,
plus simple interest on such amount at the rate of 8% per year.
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SECTION 8. AMENDMENT AND TERMINATION.
Subject to the provisions of Section 5A(5), the Board may amend, alter
or discontinue the Plan, but no amendment, alteration, or discontinuation shall
be made that would impair the rights of a Participant under any award
theretofore granted without such Participant's consent, or that without the
approval of the stockholders (as described below) would:
(1) except as provided in Section 3, increase the total number of
shares of Stock reserved for the purpose of the Plan;
(2) change the employees or class of employees eligible to participate
in the Plan; or
(3) extend the maximum option period under paragraph (2) of Section 5
of the Plan.
Notwithstanding the foregoing, stockholder approval under this Section
8 shall only be required at such time and under such circumstances as
stockholder approval would be required under Rule 16b-3 of the Act with respect
to any material amendment to any employee benefit plan of the Company.
The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Section 3, no such amendment
shall impair the rights of any holder without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant or
optionee by the Company, nothing contained herein shall give any such
Participant or optionee any rights that are greater than those of a general
creditor of the Company.
SECTION 10. CHANGE OF CONTROL.
The following acceleration and valuation provisions shall apply in the
event of a "Change of Control" as defined in paragraph (2) of this Section 10:
(1) In the event of a "Change of Control," unless otherwise determined
by the Administrator or the Board in writing at or after grant (including under
any individual agreement), but prior to the occurrence of such Change of
Control:
(a) any Stock Appreciation Rights outstanding for at least six
months and any Stock Options, including Stock Options granted under Section 5A,
awarded under the Plan not previously exercisable and vested shall become fully
exercisable and vested;
(b) the restrictions applicable to any Restricted Stock,
Deferred Stock or Performance Share awards under the Plan shall lapse, and such
shares and awards shall be deemed fully vested;
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(c) any indebtedness incurred pursuant to Section 5(5) shall
be forgiven and the collateral pledged in connection with any such loan shall be
released; and
(d) the value of all outstanding Stock Options (except Stock
Options granted under Section 5A), DERs (except DERs granted in conjunction with
Stock Options granted under Section 5A), Stock Appreciation Rights, Limited
Stock Appreciation Rights, and Restricted Stock, Deferred Stock and Performance
Share awards shall, to the extent determined by the Administrator at or after
grant, be cashed out by a payment in cash or other property, as the
Administrator may determine, on the basis of the "Change of Control Price" (as
defined in paragraph (3) of this Section 10) as of the date the Change of
Control occurs or such other date as the Administrator may determine prior to
the Change of Control.
(2) For purposes of paragraph (1) of this Section 10, a "Change of
Control" shall be deemed to have occurred if:
(a) any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company; any trustee or other fiduciary holding
securities under an employee benefit plan of the Company; or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Stock of the Company) is or becomes after
the Effective Date the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired directly
from the Company or its affiliates) representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
(b) during any period of two consecutive years (not including
any period prior to the Effective Date), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a), (c) or (d) of this Section 10(2))
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof; or
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
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(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
(3) For purposes of this Section 10, "Change of Control Price" means
the higher of (i) the highest price per share paid or offered in any transaction
related to a Change of Control of the Company or (ii) the highest price per
share paid in any transaction reported on the exchange or national market system
on which the Stock is listed, at any time during the preceding sixty day period
as determined by the Administrator, except that, in the case of Incentive Stock
Options and Stock Appreciation Rights or Limited Stock Appreciation Rights
relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the Administrator decides to cash
out such options.
SECTION 11. GENERAL PROVISIONS.
(1) The Administrator may require each person purchasing shares
pursuant to a Stock Option to represent to and agree with the Company in writing
that such person is acquiring the shares without a view to distribution thereof.
The certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
(2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee of the Company or any Subsidiary any right to
continued employment with the Company or a Subsidiary, as the case may be, nor
shall it interfere in any way with the right of the Company or a Subsidiary to
terminate the employment of any of its employees at any time.
(3) Each Participant shall, no later than the date as of which the
value of an award first becomes includable in the gross income of the
Participant for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Administrator regarding payment of, any
federal, state, or local taxes of any kind required by law to be withheld with
respect to the award. The obligations of the Company under the Plan shall be
conditional on the making of such payments or arrangements, and the Company
(and, where applicable, its Subsidiaries) shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the Participant.
(4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any
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action, determination, or interpretation taken or made in good faith with
respect to the Plan, and all members of the Board or the Administrator and each
and any officer or employee of the Company acting on their behalf shall, to the
extent permitted by law, be fully indemnified and protected by the Company in
respect of any such action, determination or interpretation.
SECTION 12. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on June 23, 1994, the
date the Company's stockholders formally approved the Plan.
SECTION 13. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock Appreciation
Right, Restricted Stock, Deferred Stock or Performance Share award shall be
granted pursuant to the Plan on or after the tenth anniversary of the Effective
Date, but awards theretofore granted may extend beyond that date.
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EXHIBIT 23.4
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement of
Redwood Trust, Inc. on Form S-8/S-3 of our report dated March 1, 1996 on our
audits of the financial statements of Redwood Trust, Inc. as of December 31,
1995 and 1994, and for the year ended December 31, 1995 and for the period from
August 19, 1994 to December 31, 1994. We also consent to the reference to our
firm under the caption "Experts."
/s/ COOPERS & LYBRAND L.L.P.
San Francisco, California
January 23, 1997
