<PAGE> 1
As filed with the Securities and Exchange Commission on March 5, 1998
Registration No. 333-18061
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
REDWOOD TRUST, INC.
<TABLE>
<S> <C> <C>
Maryland (Exact Name of Registrant as Specified in its charter) 68-0329422
(State or other jurisdiction of 591 Redwood Highway, Suite 3100 (I.R.S. Employer I.D. Number)
incorporation or organization) Mill Valley, CA 94941
</TABLE>
(415) 389-7373
(Address, including zip code, and telephone number, including area code,
of Principal Executive offices)
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 expected to be made pursuant to Rule 434,
please check the following box: [ ]
<TABLE>
<CAPTION>
==================================================================================================================
Title of shares to be Amount to be Proposed Maximum Proposed Maximum Aggregate Amount of
Registered Registered(1)(2)(3) Price Per Unit Offering Price (1)(2)(3) Registration Fee
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 $38,000,000.00 (4) $38,000,000.00 $13,104.00(5)
par value per share
==================================================================================================================
</TABLE>
(1) Represents maximum amount that may be registered under Rule 415(a)(4).
(2) Calculated pursuant to Rule 457(o) of the rules and regulations under
the Securities Act of 1933, as amended.
(3) Does not take into account any discount that may be offered to
Participants in the Dividend Reinvestment and Stock Purchase Plan.
(4) The proposed maximum offering price per share will be determined, from
time to time, by the Registrant in connection with the issuance by the
Registrant of the Securities registered hereunder.
(5) Previously paid upon filing of the original registration statement.
<PAGE> 2
[TOBIN & TOBIN LETTERHEAD]
March 5, 1998
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Mail Stop 4-9
Washington, DC 20549
Attention: Keith Pisani
Re: Post-Effective Amendment No. 1 to the Registration Statement
on Form S-3 regarding the Dividend Reinvestment and Stock
Purchase Plan of Redwood Trust, Inc. (Registration No.
333-18061)
Ladies and Gentlemen:
On behalf of Redwood Trust, Inc., a Maryland corporation (the
"Company"), we enclose for filing via EDGAR pursuant to the Securities Act of
1933, as amended, the Company's Post-Effective Amendment No. 1 to the
Registration Statement on Form S-3 (the "Registration Statement") regarding the
Company's Dividend Reinvestment and Stock Purchase Plan.
By copy of this letter, three (3) copies of the Registration Statement
are being sent to the New York Stock Exchange, and three (3) copies are being
sent to the National Association of Securities Dealers.
Please contact the undersigned at (415) 772-9679, Eugene C. Payne III at
(415) 772- 9613 or Paul Turner at (415) 772-9622, should you require additional
information or have any questions.
Very truly yours,
TOBIN & TOBIN
/s/ Phillip R. Pollock
-----------------------------------
Phillip R. Pollock
Counsel to the Company
<PAGE> 3
PROSPECTUS
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
$38,000,000.00
RWT
REDWOOD TRUST, INC.
Redwood Trust, Inc., a Maryland corporation (the "Company"), hereby offers
participation in its Dividend Reinvestment and Stock Purchase Plan (the "Plan").
The Plan is designed to provide both interested new investors as well as
existing shareholders of the Company's stock (including the Company's common
stock, par value $0.01 per share (the "Common Stock"), and other classes of
equity securities outstanding from time to time (collectively, the "Company
Stock" or "Company's Stock")) with an economical and convenient method to
purchase shares of Common Stock under the Stock Purchase program and to
designate all, a portion or none of the cash dividends on their newly purchased
Common Stock and cash dividends on their existing Company Stock for reinvestment
in more shares of Common Stock through the Dividend Reinvestment program under
the Plan. Some of the significant features of the Plan are as follows:
- Participants (as defined in Questions 2 and 5) may purchase additional
shares of Common Stock at a 2% discount (subject to change) (see Questions
4 and 12), if desired, by automatically reinvesting all or a portion of
their cash dividends on Company Stock in the Dividend Reinvestment
program.
- Participants may also purchase additional shares of Common Stock at a
discount ranging from 0% to 2% ("Optional Cash Discount") by making
optional cash payments of $500 to $5,000 per month or by making an initial
optional cash payment of $500 to $5,000 in the Stock Purchase program. See
Question 17.
- Optional cash payments in excess of $5,000 may be made with permission of
the Company at the Optional Cash Discount and may also be subject to a
minimum Threshold Price ("Threshold Price") as determined by the Company
in its sole discretion from time to time. See Question 17.
- Common Stock will be purchased by the Plan Administrator (as defined in
Question 4) directly from the Company or in open market or privately
negotiated transactions, as determined from time to time by the Company,
to fulfill requirements for the Plan.
- Holders of shares currently enrolled in the Company's Dividend
Reinvestment Plan will automatically be enrolled in this amended Plan.
Participation in the Plan is entirely voluntary, and participants may
terminate their participation at any time. Shareholders who do not choose
to participate in the Plan will continue to receive cash dividends, as
declared, in the usual manner. Participants may also request that any or
all of the shares held under their account ("Plan Shares") be sold by the
Plan Administrator. See Question 27.
- Holders of the Company's Stock held in their own name ("Record Owners")
may participate directly. Holders of shares in bank, broker or other
nominee names (a "Beneficial Owner") may participate in the Plan by
requesting that the bank, broker or other nominee reinvest dividends
and/or make optional cash payments on the Beneficial Owner's behalf.
Alternatively, Beneficial Owners may ask their bank, broker or other
nominee to transfer the shares into the Beneficial Owner's own name and
then participate directly. See Questions 6 and 8.
The shares of Common Stock, both those outstanding and those offered hereby,
as well as other shares of the Company's Stock, are subject to repurchase by the
Company under certain conditions and are subject to certain restrictions on
ownership and transferability which prohibit any person (either alone or with
others as a group) from owning shares in excess of 9.8% (by number or value) of
the outstanding shares of Company Stock, subject to certain exceptions.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is March , 1998.
<PAGE> 4
This Prospectus does not constitute an offer to sell or a solicitation of
an offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such an offer or solicitation in such
jurisdiction. No person has been authorized to give any information or to make
any representations other than those contained in this Prospectus in connection
with the offering made hereby, and if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that information herein
is correct as of any time subsequent to the date hereof.
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 of the Company is
currently listed on the New York Stock Exchange. Holders of the Common 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. This Prospectus does not contain
all information set forth in the Registration Statement and Exhibits thereto
which the Company has filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act") and to which reference is hereby made.
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).
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, and amendments thereto, for
the fiscal year ended December 31, 1996;
(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997; and
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, as amended (Reg. No.
0-26436), filed July 17, 1996, under the Exchange Act.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities made hereby shall be deemed to
be incorporated by reference into this Prospectus.
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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 Redwood
Trust, Inc., 591 Redwood Highway, Suite 3100, Mill Valley, California 94941,
telephone (415) 389-7373.
3
<PAGE> 6
REDWOOD TRUST, INC.
The Company specializes in acquiring and managing real estate mortgage
assets ("Mortgage Assets") which may be acquired as whole loans ("Mortgage
Loans") or as mortgage securities representing interests in or obligations
backed by pools of mortgage loans ("Mortgage Securities"). The Company acquires
Mortgage Assets that are secured by single-family real estate properties
throughout the United States, and may in the future acquire Mortgage Assets
secured by multi-family and commercial real estate properties. Because the
Company has elected to be subject to tax as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), it will generally not be subject to tax
on its Federal income to the extent that it distributes its earnings to its
stockholders and it maintains its qualification as a REIT. Reference to the
"Company" herein shall include any Qualified REIT Subsidiaries through which the
Company may conduct its business. The Company's principal executive office is
located at 591 Redwood Highway, Suite 3100, Mill Valley, California 94941. The
address of the Company's Web site is (http://www.redwoodtrust.com).
Additional information regarding the Company, including the audited
financial statements of the Company and descriptions of the Company, is
contained in the documents incorporated by reference herein. See "Incorporation
of Certain Information by Reference," above.
USE OF PROCEEDS
The Plan will raise additional capital for the Company to the extent that
shares of Common Stock issued hereunder are authorized but previously unissued
shares (rather than shares acquired in the open market). The Company currently
intends to issue such shares and, therefore, the Plan is expected to raise
capital for the Company. The Company intends to use the proceeds from the sale
of such shares of its Common Stock for the purchase of additional Mortgage
Assets and for other general corporate purposes.
SUMMARY OF PLAN
The Plan provides both current owners of the Company's Stock and interested
new investors with a convenient and attractive method of investing optional cash
payments of $500 to $5,000 per month in shares of Common Stock at a discount
determined each month, as described below, ranging from 0% to 2% from the Market
Price (as defined in Question 12) (the "Optional Cash Discount") and without
payment of any brokerage commission or service charge. In addition, optional
cash payments in excess of the $5,000 monthly limit may be invested in shares at
the Optional Cash Discount in cases where the Company, at its discretion,
approves a Request for Waiver for such stock purchases (see below and Question
17). The Plan also allows shareholders to reinvest their cash dividends into
shares of Common Stock at a discount of 2% (subject to change) from the Market
Price without payment of any brokerage commission or service charge. Each of the
discounts is subject to change from time to time (but will not vary from the
range of 0% to 2%) and is also subject to discontinuance at the Company's
discretion after a review of current market conditions, the level of
participation in the Plan and the Company's current and projected capital needs.
The Company will provide Participants with written notice of a change in the
applicable dividend reinvestment discount (but not the Optional Cash Discount)
at least 30 days prior to the relevant Record Date (as defined in Question 13)
or via an appropriate press release for the relevant Optional Cash Payment Due
Date (as defined in Question 18).
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Optional cash payments of less than $500 and that portion of any optional
cash payment which exceeds the maximum monthly purchase limit of $5,000, unless
such upper limit has been waived, are subject to return to the Participant
without interest. For stock purchased with optional cash payments, Participants
may elect to have the certificates for such shares sent to them free of charge
or retained by the Plan Administrator for safekeeping, and additional
certificates may be sent to the Plan Administrator for safekeeping without
payment of any fee. See Question 24. Participants may also request that any or
all shares held in the Plan be sold by the Plan Administrator on behalf of such
Participants for a nominal fee, any brokerage costs and any applicable stock
transfer taxes on the resales, all of which will be deducted by the Plan
Administrator and the balance sent to the Participant. See Question 27.
Each month, at least 5 business days prior to the Optional Cash Payment due
date, the Company will designate the Optional Cash Discount from the Market
Price for the investment of optional cash payments. Should the Company choose to
allow purchases in excess of the $5,000 monthly limit, it may also establish the
Threshold Price (defined in Question 17), applicable to all optional cash
payments that exceed $5,000 in that month, or may choose not to offer an
opportunity for such waivers for that month. Interested Participants may then
call (415) 380-2304 to receive notice of the designated Optional Cash Discount
and Threshold Price for that month, if any. The Participant must then seek
permission to exceed the normal $5,000 limit via submission of the Request for
Waiver form. If approved by the Company, full payment along with a copy of the
approved Request for Waiver form must be received by the Optional Cash Payment
Due Date. See Question 17 for further information about this aspect of the Plan.
The Optional Cash Discount and Threshold Price, which may vary from month
to month, will be established in the Company's sole discretion after a review of
transaction costs, current market conditions, the level of participation in the
Plan and the Company's current and projected capital needs. With respect to
optional cash payments that exceed $5,000 only, for each Trading Day of the
related Pricing Period (each as defined in Question 12) on which the Threshold
Price is not satisfied, 1/10 of a Participant's optional cash payment will be
returned without interest. Optional cash payments that do not exceed $5,000 and
the reinvestment of dividends in additional shares of Common Stock will not be
subject to the Threshold Price, if any.
The Company expects to grant Requests for Waiver to financial
intermediaries, including brokers and dealers, and other Participants in the
future. Grants of Requests for Waiver will be made in the sole discretion of the
Company based on a variety of factors, which may include: the Company's current
and projected capital needs, the alternatives available to the Company to meet
those needs, prevailing market prices for Common Stock, general economic and
market conditions, expected aberrations in the price or trading volume of the
Common Stock, the potential disruption of the price of the Common Stock by a
financial intermediary, the number of shares of the Company's Stock held by the
Participant submitting the Request for Waiver, the past actions of a Participant
under the Plan, the aggregate amount of optional cash payments for which such
Requests for Waivers have been submitted and the administrative constraints
associated with granting such Requests for Waivers. If such Requests for Waiver
are granted, a portion of the shares available for issuance under the Plan will
be purchased by Participants (including brokers or dealers) who, in connection
with any resales of such shares, may be deemed to be underwriters within the
meaning of the Securities Act. To the extent that Requests for Waiver are
granted it is expected that a greater number of shares will be issued under the
Stock Purchase program of the Plan as opposed to the Dividend Reinvestment
program of the Plan. Subject to the availability of shares of Common Stock
registered for issuance under the Plan, there is no pre-
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established maximum limit on the number of shares that may be purchased pursuant
to approved Requests for Waivers.
Financial intermediaries may purchase a significant portion of the shares
of Common Stock issued pursuant to the Stock Purchase program of the Plan. The
Company does not have any formal or informal understanding with any such
organizations and, therefore, the extent of such financial intermediaries'
participation under the Plan cannot be estimated at this time. Participants that
are financial intermediaries that acquire shares of Common Stock under the Plan
with a view to distribution of such shares or that offer or sell shares for the
Company in connection with the Plan may be deemed to be underwriters within the
meaning of the Securities Act.
From time to time, financial intermediaries, including brokers and dealers,
may engage in positioning transactions in order to benefit from the discount
from the Market Price of the shares of Common Stock acquired through the
reinvestment of dividends under the Plan. Such transactions may cause
fluctuations in the trading volume of the Common Stock. Financial intermediaries
that engage in positioning transactions may be deemed to be underwriters within
the meaning of the Securities Act. The Plan is intended for the benefit of
investors in the Company and not for individuals who engage in transactions
which may cause aberrations in the price or trading volume of the Common Stock.
THE PLAN
The original Dividend Reinvestment Plan was adopted by the Board of
Directors on September 15, 1995 and became effective on October 9, 1995. The
Plan was significantly amended by the Board of Directors as of December 13, 1996
to include the Stock Purchase program. The following questions and answers
explain and constitute the Plan. Shareholders who do not participate in the Plan
will receive cash dividends, as declared, and paid in the usual manner.
PURPOSE
1. WHAT IS THE PURPOSE OF THE PLAN?
The primary purpose of the Plan is to provide both current shareholders of
the Company's Stock and interested new investors with an economical and
convenient method of increasing their investment in the Company by investing
cash dividends in additional shares of Common Stock without payment of any
brokerage commission or service charge and at a 2% discount from the Market
Price (as defined in Question 12), and/or by investing optional cash payments in
shares of Common Stock at an Optional Cash Discount ranging from 0% to 2% from
the Market Price (see Question 17) without payment of any brokerage commission
or service charge. See Question 5 for a description of the holders who are
eligible to participate in the Plan and methods for Beneficial Owners and
current non-shareholders to become eligible to participate. To the extent shares
are purchased from the Company under the Plan, the Company will receive
additional funds for general corporate purposes.
The Plan may also be used by the Company to raise additional capital
through the sale each month of a portion of the shares available for issuance
under the Plan to purchasers of shares (including brokers or dealers) who, in
connection with any resales of such shares, may be deemed to be underwriters.
These sales
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will be effected through the Company's ability to waive limitations applicable
to the amounts which Participants may invest pursuant to the Plan's Stock
Purchase program (see Question 17 for information concerning limitations
applicable to optional cash payments and certain of the factors considered by
the Company in granting waivers).
However, the Plan is primarily intended for the benefit of long-term
investors, and not for the benefit of individuals or institutions who engage in
short-term trading activities that could cause aberrations in the composite
trading volume of the Company's Common Stock. From time to time, financial
intermediaries may engage in positioning transactions in order to benefit from
the discount from the Market Price of the shares of Common Stock acquired
through the reinvestment of dividends under the Plan. Such transactions may
cause fluctuations in the trading volume of the Common Stock. The Company
reserves the right to modify, suspend or terminate participation in the Plan by
otherwise eligible holders of Common Stock in order to eliminate practices which
are not consistent with the purposes of the Plan.
OPTIONS AVAILABLE TO PARTICIPANTS
2. WHAT OPTIONS ARE AVAILABLE TO ENROLLED PARTICIPANTS?
Dividend Reinvestment Program. Holders of the Company's Stock who wish to
participate in the Plan, whether Record Owners, Beneficial Owners or interested
new investors who make an initial investment through the Stock Purchase program
described below (each a "Participant"; see also Question 5 regarding the
definition of a "Participant") may elect to have all, a portion or none of their
cash dividends paid on their shares of the Company's Stock automatically
reinvested in additional shares of Common Stock through the Dividend
Reinvestment program. Cash dividends are paid on the Company's Stock when and as
declared by the Company's Board of Directors, generally on a quarterly basis.
There is no limitation on the amount of shares a Participant may elect dividend
reinvestment on.
Stock Purchase Program. Each month, Participants may also elect to invest
optional cash payments in shares of Common Stock, subject to a minimum monthly
purchase limit of $500 and a maximum monthly purchase limit of $5,000. The
maximum limit is subject to waiver at the Company's discretion. See Question 17.
Participants may make optional cash payments each month even if dividends on
their shares of Common Stock are not being reinvested and whether or not a
dividend has been declared. Participants are not required to enroll any shares
of Common Stock purchased through the Stock Purchase program into the Dividend
Reinvestment program but may designate all or a portion of such shares for such
participation on the Authorization Form if desired.
ADVANTAGES AND DISADVANTAGES
3. WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE PLAN?
ADVANTAGES
(a) The Plan provides Participants with the opportunity to reinvest cash
dividends paid on all or a portion of their shares of the Company's Stock in
additional shares of Common Stock without payment of any
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brokerage commissions or service charge and at a 2% discount from the Market
Price (as defined in Question 12 and subject to change).
(b) The Plan provides Participants with the opportunity to make monthly
investments of optional cash payments, subject to minimum and maximum amounts,
for the purchase of shares of Common Stock at the Optional Cash Discount ranging
from 0% to 2% from the Market Price and without payment of any brokerage
commission or service charge. See Question 17 regarding how to obtain
information about each month's Optional Cash Discount. The Participant may
designate all, a portion or none of such Plan Shares to be enrolled in the
Dividend Reinvestment program.
(c) All cash dividends paid on Participants' Plan Shares enrolled in the
Dividend Reinvestment program can be fully invested in additional shares of
Common Stock because the Plan permits fractional shares to be credited to Plan
accounts. Dividends on such fractional shares, as well as on whole shares, will
also be reinvested in additional shares which will be credited to Plan accounts.
(d) The Plan Administrator, at no charge and at the election of
Participants, either sends certificates to Participants for optional shares
purchased or provides for the safekeeping of stock certificates for shares
credited to each Plan account.
(e) A Participant may also elect to deposit with the Plan Administrator
certificates for the stockholder's other shares of the Company's Stock
registered in his or her name for safekeeping without charge. Because the
Participant bears the risk of loss in sending certificates to the Plan
Administrator, certificates should be sent by registered mail, return receipt
requested, and properly insured to the address specified in Question 37 below.
If certificates are later issued either upon request of the Participant or upon
termination of participation, new, differently numbered certificates will be
issued.
(f) Periodic statements reflecting all current activity, including Plan
Share purchases and the most recent Plan account balance, simplify Participants'
record keeping. See Question 22 for information concerning reports to
Participants.
DISADVANTAGES
(a) No interest will be paid by the Company or the Plan Administrator on
dividends or optional cash payments held pending reinvestment or investment. See
Question 11. In addition, optional cash payments of less than $500 and that
portion of any optional cash payment which exceeds the maximum monthly purchase
limit of $5,000, unless such upper limit has been waived, are subject to return
to the Participant without interest. Moreover, purchases above the $5,000 limit
that have been granted a waiver may also be subject to return to the Participant
without interest in the event that the Threshold Price, if any, is not met for
any Trading Day during the related Pricing Period. See Question 17.
(b) With respect to shares acquired from the Company, the actual number of
shares to be issued to the Participant or the Participant's Plan account will
not be determined until after the end of the relevant Pricing Period. Therefore,
during the Pricing Period Participants will not know the actual price per share
or number of shares they have purchased.
(c) With respect to shares acquired from the Company, while the Plan
currently provides for a discount from the Market Price during the Pricing
Period, the Market Price, as so discounted, may exceed the price at which shares
of the Common Stock are trading on the Investment Date (as defined in Questions
11 and 18)
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<PAGE> 11
when the shares are issued or thereafter. The trading price on the Investment
Date generally governs the amount of taxable income to shareholders. See
Question 34.
(d) Because optional cash payments must be received by the Plan
Administrator by the Optional Cash Payment Due Date, such payments may be
exposed to changes in market conditions for a longer period of time than in the
case of typical secondary market transactions. See Questions 11 and 18 through
20 for detailed information.
(e) Resales of shares of Common Stock credited to a Participant's account
under the Plan will involve a nominal fee per transaction to be deducted from
the proceeds of the sale by the Plan Administrator (if such resale is made by
the Plan Administrator at the request of a Participant), plus any brokerage
commission and any applicable stock transfer taxes on the resales. See Questions
21 and 27.
ADMINISTRATION
4. WHO ADMINISTERS THE PLAN?
The Company has retained Mellon Bank, N.A., as plan administrator (the
"Plan Administrator"), to administer the Plan, keep records, send statements of
account activity to each Participant and perform other duties relating to the
Plan. See Question 22 for information concerning reports to Participants.
Certificates for Plan Shares purchased pursuant to the Stock Purchase program
but not designated for investment in the Dividend Reinvestment program will be
sent to the Participant or held by the Plan Administrator, at the Participant's
discretion, free of charge. Plan Shares designated for the Dividend Reinvestment
program will be held by the Plan Administrator and registered in the Plan
Administrator's name (or its nominee) as agent for each Participant in the Plan.
As record holder for the Plan Shares, the Plan Administrator will receive
dividends on all Plan Shares held on the dividend Record Date, will credit such
dividends to Participants' accounts on the basis of whole or fractional Plan
Shares held in such accounts, and will automatically reinvest such dividends in
additional shares of Common Stock according to the portion of the Participants'
shares of Company Stock designated to participate in the Dividend Reinvestment
program. Any remaining portion of cash dividends not designated for reinvestment
will be sent to the Participant. See Question 9. If the Plan Administrator
resigns or otherwise ceases to act as plan administrator, the Company will
appoint a new plan administrator to administer the Plan.
The Plan Administrator also acts as dividend disbursing agent, transfer
agent and registrar for the Company's Stock.
PARTICIPATION
For purposes of this section, responses are generally directed (a) to
existing shareholders, according to the method by which their shares are held,
or (b) to investors who are not currently shareholders but would like to make an
initial purchase of Common Stock to become a Participant. Existing shareholders
are either Record Owners or Beneficial Owners. A Record Owner is a shareholder
who owns shares of Company Stock in his or her own name. A Beneficial Owner is a
shareholder who beneficially owns shares of Company Stock that are registered in
a name other than his or her own name (for example, the shares are held in the
name of a bank, broker or other nominee). A RECORD OWNER MAY PARTICIPATE
DIRECTLY IN THE PLAN, WHEREAS A BENEFICIAL
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OWNER WILL EITHER HAVE TO BECOME A RECORD OWNER BY HAVING ONE OR MORE SHARES
TRANSFERRED INTO HIS OR HER OWN NAME OR COORDINATE HIS OR HER PARTICIPATION IN
THE PLAN THROUGH THE BANK, BROKER OR OTHER NOMINEE IN WHOSE NAME THE BENEFICIAL
OWNER'S SHARES ARE HELD. For more detailed information and instructions, see
Questions 5 and 6.
5. WHO IS ELIGIBLE TO PARTICIPATE?
Record Owners. All Record Owners of Company Stock are eligible to
participate directly in the Dividend Reinvestment program and Stock Purchase
program.
Beneficial Owners. In order to participate directly in the Plan, a
Beneficial Owner must become a Record Owner by having one or more shares
transferred into his or her own name from that of the applicable bank, broker or
other nominee. Alternatively, a Beneficial Owner may seek to arrange with the
bank, broker or other nominee who is the Record Owner to participate on the
Beneficial Owner's behalf.
Non-Shareholders. Individuals who do not presently own any of the
Company's Stock (as either a Record Owner or Beneficial Owner) may participate
in the Stock Purchase program by making an initial purchase of Common Stock
through the Stock Purchase program.
The Company may terminate, by written notice, at any time any Participant's
individual participation in the Plan if such participation would be in violation
of the restrictions contained in the Articles of Incorporation or Bylaws of the
Company. Such restrictions prohibit any person or group of persons from
acquiring or holding, directly or indirectly, ownership of shares of capital
stock of the Company in excess of 9.8% (by number or value) of the outstanding
shares. The meaning ascribed to the terms "group" and "ownership" may cause a
person who individually owns less than 9.8% of the shares outstanding to be
deemed to be holding shares in excess of the foregoing limitation. The Articles
of Incorporation provide that in the event a person acquires shares of capital
stock in excess of the foregoing limitation, the excess shares are deemed
tendered for purchase to the Company at a price calculated pursuant to a formula
set forth in the Articles of Incorporation. Under the Articles of Incorporation
any acquisition of shares of the Company that would result in the
disqualification of the Company as a real estate investment trust for tax
purposes is void to the fullest extent permitted by law.
6. HOW DOES AN ELIGIBLE SHAREHOLDER PARTICIPATE?
RECORD OWNERS may join the Plan by completing and signing an Authorization
Form and returning it to the Plan Administrator. Authorization Forms may be
obtained at any time by written request to Mellon Bank, N.A., c/o ChaseMellon
Shareholder Services, P.O. Box 3339 South Hackensack, NJ 07606-1939, or by
telephoning the Plan Administrator at (888) 877-2882.
BENEFICIAL OWNERS who wish to join the Plan must instruct their bank,
broker or other nominee to arrange participation in the Plan on the Beneficial
Owner's behalf. The bank, broker or other nominee should then make arrangements
with its securities depository and the securities depository will provide the
Plan Administrator with the information necessary to allow the Beneficial Owner
to participate in the Plan. Should the Beneficial Owner wish to participate in
the Stock Purchase program, a Broker and Nominee Form ("B&N form") must also be
sent to the Plan Administrator for the bank, broker or other nominee to
participate in the Stock Purchase Program on behalf of the Beneficial Owner. See
Question 8. To facilitate participation by Beneficial Owners, the Company has
made arrangements with the Plan Administrator to reinvest dividends,
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on a per dividend basis, and accept optional cash payments under the Stock
Purchase program by record holders such as brokers, banks and other nominees, on
behalf of Beneficial Owners. Interested beneficial owners are cautioned to
insure that the broker, bank or other nominee passes along the proceeds of any
applicable discount to the beneficiary's account.
Alternatively, a Beneficial Owner may simply request that the number of
shares the Beneficial Owner wishes to be enrolled in the Plan be reclassified or
reregistered by the bank, broker or other nominee in the Beneficial Owner's own
name as Record Owner in order to directly participate in the Plan.
NON-SHAREHOLDERS may join the Plan as a Record Owner by making an initial
investment in an amount of at least $500 up to $5,000 (unless the maximum limit
is specifically waived by the Company, as discussed in Question 17). The
non-shareholder should mark the box on the Authorization Form indicating that it
is a non-shareholder wishing to become a Participant and should designate the
amount for initial purchase of Common Stock. At the same time, the new
Participant may designate all, a portion or none of the shares to be purchased
to be enrolled in the Dividend Reinvestment program. The Authorization Form
should be returned to the Plan Administrator, with payment, on or before the
applicable dates discussed below.
ANY PARTICIPANT WHO RETURNS A PROPERLY EXECUTED AUTHORIZATION FORM TO THE
PLAN ADMINISTRATOR WITHOUT SPECIFYING THE NUMBER OF SHARES TO BE INCLUDED IN THE
DIVIDEND REINVESTMENT PROGRAM WILL BE ENROLLED AS HAVING SELECTED THE FULL
DIVIDEND REINVESTMENT OPTION DESCRIBED BELOW. See Question 7 for other
investment option information.
If an Authorization Form requesting reinvestment of dividends is received
by the Plan Administrator at least 2 business days before the Record Date
established for a particular dividend, reinvestment will commence with that
dividend. If an Authorization Form is received less than 2 business days before
the Record Date established for a particular dividend, the reinvestment of
dividends will begin on the dividend payment date following the next Record Date
if such stockholder or the participating bank, broker or other nominee is still
a holder of record. Additionally, for Participants wishing to make optional cash
payments to purchase shares under the Stock Purchase program, full payment must
be received by the Plan Administrator by the Optional Cash Due Date. In the case
of current non-shareholders making an initial investment to become Participants,
both the Authorization Form and full payment of their designated initial
investment must be received by the Optional Cash Payment Due Date. See also
Questions 7 and 8.
7. WHAT DOES THE AUTHORIZATION FORM PROVIDE?
The Authorization Form appoints the Plan Administrator as agent for the
Participant and directs the Company to pay to the Plan Administrator the
Participant's cash dividends on the Company's Stock owned by the Participant on
the applicable Record Date and enrolled in the Dividend Reinvestment program,
and thereafter including all whole and fractional shares of Common Stock
credited to the Participant's Plan account as they are added with each
reinvestment or optional purchase designated for reinvestment. Such cash
dividends with respect to shares enrolled in the Dividend Reinvestment program
will be automatically reinvested by the Plan Administrator in shares of Common
Stock. Any remaining cash dividends not enrolled in the Dividend Reinvestment
program are paid directly to the Participant.
Additionally, the Authorization Form directs the Plan Administrator to
purchase Common Stock with a Participant's optional cash payments, if any, and
whether to enroll all, a portion or none of such new Plan Shares in the Dividend
Reinvestment program. See Question 8 for a discussion of the B&N Form which is
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required to be used for optional cash payments of a Beneficial Owner whose bank,
broker or other nominee holds the Beneficial Owner's shares in the name of a
major securities depository.
The Authorization Form provides for the purchase of initial or additional
shares of Common Stock through the following investment options:
(1) If "Full Dividend Reinvestment" is elected, the Plan Administrator will
apply all cash dividends on all shares of the Company's Stock then or
subsequently registered in the Participant's name, and all cash
dividends on all Plan Shares (except as otherwise directed under (3)
below), together with any optional cash payments, toward the purchase
of additional Plan Shares.
(2) If "Partial Dividend Reinvestment" is elected, the Plan Administrator
will apply all cash dividends on only the number shares of the
Company's Stock then or subsequently registered in the Participant's
name and specified on the Authorization Form and all cash dividends on
all Plan Shares (except as otherwise directed under (3) below),
together with any optional cash payments, toward the purchase of
additional Plan Shares.
(3) Under "Optional Cash Payments," the Participant directs the Plan
Administrator to apply any optional cash payments made by the
Participant to the purchase of additional shares of Common Stock in
accordance with the Plan and to apply dividends on such additional Plan
Shares as directed. UNLESS THE PARTICIPANT DESIGNATES ALL, A PORTION OR
NONE OF SUCH NEW PLAN SHARES FOR ENROLLMENT IN THE DIVIDEND
REINVESTMENT PROGRAM, THE PARTICIPANT WILL BE ENROLLED AS HAVING
SELECTED THE FULL DIVIDEND REINVESTMENT OPTION.
Each Participant may select any one of the options desired, and the
designated options will remain in effect until a Participant specifies otherwise
by indicating a different option on a new Authorization Form, by withdrawing
some or all shares from the Plan in favor or receiving cash dividends or in
order to sell the Participant's Common Stock (see Questions 26 and 27), or until
the Plan is terminated.
Participants may change their investment options at any time by requesting
a new Authorization Form and returning it to the Plan Administrator at the
address set forth in Question 37. See Question 11 for the effective date for any
change in investment options.
ANY PARTICIPANT WHO RETURNS A PROPERLY EXECUTED AUTHORIZATION FORM TO THE
PLAN ADMINISTRATOR WITHOUT ELECTING AN INVESTMENT OPTION WILL BE ENROLLED AS
HAVING SELECTED THE FULL DIVIDEND REINVESTMENT OPTION.
8. WHAT DOES THE B&N FORM PROVIDE?
The B&N Form provides the only means other than redesignation of the stock
in the Beneficial Owner's own name, by which bank, broker or other nominee
holding shares of a Beneficial Owner in the name of a major securities
depository may invest optional cash payments on behalf of such Beneficial Owner.
A B&N FORM MUST BE DELIVERED TO THE PLAN ADMINISTRATOR EACH TIME THAT SUCH BANK,
BROKER OR OTHER NOMINEE TRANSMITS OPTIONAL CASH PAYMENTS ON BEHALF OF A
BENEFICIAL OWNER. Forms will be furnished at any time upon request to the Plan
Administrator at the address or telephone number specified in Question 37.
Prior to submitting the B&N Form, the bank, broker or other nominee for a
Beneficial Owner must make arrangements with its securities depository and the
Plan Administrator in order to participate on behalf of the Beneficial Owner.
See Questions 6 and 7.
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THE B&N FORM AND APPROPRIATE INSTRUCTIONS MUST BE RECEIVED BY THE PLAN
ADMINISTRATOR NOT LATER THAN 1 BUSINESS DAY BEFORE THE APPLICABLE OPTIONAL CASH
PAYMENT DUE DATE OR THE PAYMENT WILL NOT BE INVESTED UNTIL THE FOLLOWING
INVESTMENT DATE.
9. IS PARTIAL PARTICIPATION POSSIBLE UNDER THE PLAN?
Yes. New investors, Record Owners or the bank, broker or other nominee for
Beneficial Owners may designate any desired number of their shares for which
dividends are to be reinvested. Dividends will thereafter be reinvested only on
the number of shares specified, and the Participant will continue to receive
cash dividends on the remainder of the shares.
10. WHEN MAY AN ELIGIBLE SHAREHOLDER JOIN THE PLAN?
A Record Owner or a Beneficial Owner may join the Plan at any time. A
non-shareholder may join the Plan by making an initial investment of $500 to
$5,000 (or more by permission of the Company) when returning the Authorization
Form. See Question 7. Once in the Plan, a Participant remains in the Plan until
he or she withdraws from the Plan, the Company terminates his or her
participation in the Plan or the Company terminates the Plan. See Question 27
regarding withdrawal from the Plan. The Company may terminate a Participant from
the Plan if the number of shares a Participant has in the Plan drops below 1
share.
11. WHAT ARE INVESTMENT DATES AND WHEN WILL DIVIDENDS OR OTHER MONIES BE
INVESTED?
Shares purchased under the Plan will be purchased on the "Investment Date"
in each month. The Investment Date with respect to the Common Stock acquired
pursuant to dividend reinvestments will be (i) if acquired directly from the
Company, the quarterly dividend payment date declared by the Board of Directors
(generally the 21st day of the month (unless such date is not a business date in
which case it is the 1st business day immediately thereafter)), or (ii) in the
case of open market purchases, the date or dates of actual investment, but no
later than 10 business days following the dividend payment date. See Question 18
for detailed information concerning Investment Dates for optional cash payments
under the Stock Purchase program. See Schedule A for a listing of expected
Investment Dates pursuant to dividend reinvestments.
When open market purchases are made by the Plan Administrator, such
purchases may be made on any securities exchange where the shares are traded, in
the over-the-counter market or by negotiated transactions, and may be subject to
such terms with respect to price, delivery and other matters as agreed to by the
Plan Administrator. Neither the Company nor any Participant shall have any
authorization or power to direct the time or price at which shares will be
purchased or the selection of the broker or dealer through or from whom
purchases are to be made by the Plan Administrator. However, when open market
purchases are made by the Plan Administrator, the Plan Administrator shall use
its best efforts to purchase the shares at the lowest possible price.
Shares will be allocated and credited to Participants' accounts on the
appropriate Investment Date.
NO INTEREST WILL BE PAID ON CASH DIVIDENDS PENDING
INVESTMENT OR REINVESTMENT UNDER THE TERMS OF THE PLAN.
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<PAGE> 16
PURCHASES AND PRICES OF SHARES
12. WHAT WILL BE THE PRICE TO PARTICIPANTS OF SHARES PURCHASED UNDER THE PLAN?
With respect to reinvested dividends (see Question 17 for a discussion of
the discount applicable to optional cash payments), whether the shares are
acquired directly from the Company or on the open market, they will be purchased
for the Plan at a discount of 2% from the Market Price (as defined below).
However, in no event shall the amount of discount specified above, plus any
brokerage commissions as described in Question 21 below, exceed 5% of the fair
market value of the Common Stock on the date of purchase.
The Market Price, in the case of shares purchased directly from the
Company, will be the average of the daily high and low sales prices, computed to
3 decimal places, of the Common Stock on the NYSE or other applicable securities
exchange, as reported in the Wall Street Journal, during the Pricing Period (the
10 days on which the NYSE is open and for which trades in the Company's Common
Stock are reported immediately preceding the relevant Investment Date, or, if no
trading occurs in the Common Stock on one or more of such days, for the 10 days
immediately preceding the Investment Date for which trades are reported). In the
case of shares purchased on the open market, the Market Price will be the
weighted average of the actual prices paid, computed to 3 decimal places, for
all of the Common Stock purchased by the Plan Administrator with all
Participants' reinvested dividends and optional cash payments for the related
month.
Neither the Company nor any Participant shall have any authorization or
power to direct the time or price at which shares will be purchased or the
selection of the broker or dealer through or from whom purchases are to be made
by the Plan Administrator. However, when open market purchases are made by the
Plan Administrator, the Plan Administrator shall use its best efforts to
purchase the shares at the lowest possible price.
13. WHAT ARE THE RECORD DATES FOR DIVIDEND REINVESTMENT?
For the reinvestment of dividends, the "Record Date" is the Record Date
declared by the Board of Directors for such dividend. Likewise, the dividend
payment date declared by the Board of Directors constitutes the Investment Date.
See question 11 for further details about Investment Dates. See Schedule A for a
list of the expected future dividend Record Dates and payment dates through the
end of 1999. Please refer to Questions 11, 18 and 19 for a discussion of the
Investment Dates and Optional Cash Payment Due Dates applicable to optional cash
payments.
14. HOW WILL THE NUMBER OF SHARES PURCHASED FOR A PARTICIPANT BE DETERMINED?
A Participant's account in the Plan will be credited with the number of
shares, including fractions computed to 4 decimal places, equal to the total
amount to be invested on behalf of such Participant divided by the result of
100% less the applicable discount from the Market Price per share as calculated
pursuant to the methods described in Question 12. The total amount to be
invested will depend on the amount of any dividends paid on the number of shares
owned by the Participant and designated for reinvestment, plus dividends on the
Plan Shares in such Participant's Plan account designated for reinvestment and
the amount of any optional cash payments made by such Participant and available
for investment on the related Investment Date. Subject to the availability of
shares of Common Stock registered for issuance under the Plan, there is no total
maximum number of shares available for issuance pursuant to the reinvestment of
dividends.
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15. WHAT IS THE SOURCE OF COMMON STOCK PURCHASED UNDER THE PLAN?
Plan Shares will be purchased either directly from the Company or on the
open market, or by a combination of the foregoing, at the option of the Company,
after a review of current market conditions and the Company's current and
projected capital needs. The Company will determine the source of the Common
Stock to be purchased under the Plan. Neither the Company nor the Plan
Administrator shall be required to provide any written notice to Participants as
to the source of the Common Stock to be purchased under the Plan, but current
information regarding the source of the Common Stock may be obtained by
contacting the Company at (415) 389-7373.
16. HOW DOES THE STOCK PURCHASE PROGRAM OF THE PLAN WORK?
All current Record Owners and non-shareholders who have timely submitted
signed Authorization Forms indicating their intention to participate in this
program of the Plan, and Beneficial Owners whose brokers, banks or other
nominees have timely indicated their intention to participate in this program
(except for Beneficial Owners whose brokers, banks or other nominees hold the
shares of the Beneficial Owners in the name of a major securities depository),
are eligible to make optional cash payments during any month, whether or not a
dividend is declared. If a bank, broker or other nominee holds shares of a
Beneficial Owner in the name of a major securities depository, optional cash
payments must be made through the use of the B&N Form. See Question 8. Optional
cash payments must be accompanied by an Authorization Form or a B&N Form, as
applicable. Each month the Plan Administrator will apply any optional cash
payment received from a Participant no later than the Optional Cash Payment Due
Date to the purchase of additional shares of Common Stock for the account of the
Participant on the following Investment Date (as defined in Questions 11 and 18)
and will enroll all, a portion or none of such shares in the Dividend
Reinvestment program as so directed by the Participant on the Authorization
Form.
The Optional Cash Discount will be established each month by the Company
and will range between 0% and 2% of the Market Price. Refer to Question 17
regarding how to obtain information on the discount and for a discussion of the
possible limitations on the purchase price applicable to the purchase of shares
made with optional cash payments.
17. WHAT LIMITATIONS APPLY TO OPTIONAL CASH PAYMENTS?
Optional Cash Discount. Each month the Company may establish a discount
from the Market Price applicable to optional cash payments. Such Optional Cash
Discount may be between 0% and 2% of the purchase price and may vary each month,
but once established will uniformly apply to all optional cash payments for that
month. Setting an Optional Cash Discount for a particular month shall not affect
the setting of an Optional Cash Discount for any subsequent month. In no event
shall the Optional Cash Discount exceed 5% of the fair market value of the
Common Stock on the date of purchase if the participant is also participating in
the dividend reinvestment component of the Plan.
Participants may obtain the Optional Cash Discount for a given Pricing
Period by telephoning Redwood Trust at (415) 380-2304 to hear a pre-recorded
message. See Schedule A for a list of expected dates for setting the Optional
Cash Discount.
Request for Waiver. Optional cash payments in excess of $5,000 per month
may be made only pursuant to a Request for Waiver approved by the Company.
Because of certain tax concerns which the Company has as a real estate
investment trust, however, a Request for Waiver may only be considered for
investors who certify that they
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are not participating in the dividend reinvestment component of the Plan.
Participants who wish to submit an optional cash payment in excess of $5,000 for
any Investment Date must obtain the prior written approval of the Company, and a
copy of such written approval must accompany any such optional cash payment. In
order to receive a Request for Waiver Form, Participants should request the form
from the Company via facsimile at (415) 381-1773. At least 5 business days prior
to the applicable Optional Cash Payment Due Date for an Investment Date, the
Company will determine whether to establish a Threshold Price (described below)
and/or an Optional Cash Discount. This determination will be made by the Company
in its discretion after a review of such considerations as transaction costs,
current market conditions, the level of participation in the Plan, and current
projected capital needs. After the Threshold Price and Optional Cash Discount
set date, Participants may ascertain whether a Threshold Price has been set or
waived, and obtain the Optional Cash Discount, for the given Pricing Period by
telephoning Redwood Trust at (415) 380-2304 to hear a pre-recorded message. A
Request for Waiver must then be received by the Company via U.S. mail or
facsimile at (415) 381-1773 for that month at least 2 business days before the
Optional Cash Due Date. The Company will then notify the Participant if the
Request for Waiver has been approved no later than 1 business day prior to the
Optional Cash Due Date. Please refer to Question 16 for further procedural
details with respect to submitting timely payments and the allowable period
within which bank clearance must be achieved.
THE COMPANY HAS SOLE DISCRETION WHETHER TO GRANT ANY APPROVAL FOR OPTIONAL
CASH PAYMENTS IN EXCESS OF THE ALLOWABLE MAXIMUM AMOUNT. In deciding whether to
approve a Request for Waiver, the Company will consider a variety of relevant
factors including, but not limited to, transaction costs, whether the Plan is
then acquiring newly issued shares directly from the Company or acquiring shares
in the open market, the Company's need for additional funds, the attractiveness
of obtaining such additional funds through the sale of Common Stock as compared
to other sources of funds, the purchase price likely to apply to any sale of
Common Stock, the Participant submitting the request, the extent and nature of
such Participant's prior participation in the Plan, the number of shares of
Common Stock held of record by such Participant and the aggregate amount of
optional cash payments in excess of $5,000 for which Requests for Waiver have
been submitted by all Participants. If Requests for Waiver are submitted for any
Investment Date for an aggregate amount in excess of the amount the Company is
then willing to accept, the Company may honor such requests in order of receipt,
pro rata or by any other method that the Company determines to be appropriate.
There is no pre-established maximum limit applicable to optional cash payments
that may be made pursuant to approved Requests for Waiver.
Minimum/Maximum Limits. For any Investment Date, each optional cash
payment is subject to a minimum of $500 and a maximum of $5,000. See Questions
11 and 18 regarding the determination of Investment Dates for optional cash
payments. For purposes of these limitations, all Plan accounts under common
control, management or representation by a bank, broker or other nominee on a
B&N Form will be aggregated. Optional cash payments of less than $500 and that
portion of any cash payment which exceeds the maximum monthly purchase limit of
$5,000, unless such maximum limit has been waived by the Company, will be
returned to the Participant without interest at the end of the relevant Pricing
Period.
Threshold Price. The Company may establish for any Pricing Period a
minimum price (the "Threshold Price") applicable to optional cash payments made
pursuant to Requests for Waiver. If established for any Pricing Period, the
Threshold Price will be stated as a dollar amount that the average of the high
and low sales price of the Common Stock on the NYSE, or other applicable
securities exchange, for each day of the
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<PAGE> 19
applicable Pricing Period must equal or exceed. In the event that the Threshold
Price is not satisfied for a Trading Day in the Pricing Period, then that day
and the trading prices for that day will be excluded from that Pricing Period.
Thus, for example, if the Threshold Price is not satisfied for 3 of the 10 days
in a Pricing Period, then the average sales price for purchases and the optional
cash payments which may be invested will be based on the remaining 7 days when
the Threshold Price is satisfied. For each day during the Pricing Period for
which the Threshold Price is not satisfied, 1/10 of each optional cash payment
made pursuant to a Request for Waiver will be returned to such Participant by
check, without interest, as soon as practicable after the applicable Investment
Date.
The establishment of a Threshold Price and the possible return of a portion
of the investment applies only to optional cash payments made pursuant to a
Request for Waiver. Setting a Threshold Price for a Pricing Period shall not
affect the setting of a Threshold Price for any subsequent Pricing Period.
Neither the Company nor the Plan Administrator shall be required to provide any
written notice to Participants as to the Threshold Price for any Pricing Period.
18. WHAT ARE THE DUE DATES AND INVESTMENT DATES FOR OPTIONAL CASH PAYMENTS?
Optional cash payments will be invested every month on the related
Investment Date. The Optional Cash Payment Due Date is 1 business day prior to
the commencement of the related Pricing Period and the "Investment Date" is on
or about the 21st day of each month or, in the case of open market purchases, no
later than the last business day of each month.
Optional cash payments received by the Plan Administrator by the Optional
Cash Payment Due Date will be applied to the purchase of shares of Common Stock
on the Investment Date which relates to that Pricing Period. No interest will be
paid by the Company or the Plan Administrator on optional cash payments held
pending investment. Generally, optional cash payments received after the
Optional Cash Payment Due Date will be returned to Participants without interest
at the end of the Pricing Period; such optional cash payments may be resubmitted
by a Participant prior to the commencement of the next or a later Pricing Period
as to which the Company is entertaining Requests for Waiver.
For a schedule of expected Optional Cash Payment Due Dates and Investment
Dates through January 2000, see Schedule A.
19. WHEN MUST OPTIONAL CASH PAYMENTS BE RECEIVED BY THE PLAN ADMINISTRATOR AND
CLEARED BY THE BANK?
Each month the Plan Administrator will apply an optional cash payment for
which good funds are timely received to the purchase of shares of Common Stock
for the account of the Participant on the next Investment Date. See Questions 11
and 18. In order for funds to be invested on the next Investment Date, the Plan
Administrator must have received a check, money order or wire transfer by the
Optional Cash Payment Due Date and such check, money order or wire transfer must
have cleared before the related Investment Date. Wire transfers may be used only
if approved verbally in advance by the Plan Administrator. Checks and money
orders are accepted subject to timely collection as good funds and verification
of compliance with the terms of the Plan. Checks or money orders should be made
payable to "Mellon Bank, N.A. -- Redwood Trust, Inc. DRP." Checks returned for
any reason will not be resubmitted for collection.
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NO INTEREST WILL BE PAID BY THE COMPANY OR THE PLAN ADMINISTRATOR ON
OPTIONAL CASH PAYMENTS HELD PENDING INVESTMENT. SINCE NO INTEREST IS PAID ON
CASH HELD BY THE PLAN ADMINISTRATOR, IT NORMALLY WILL BE IN THE BEST INTEREST OF
A PARTICIPANT TO DEFER OPTIONAL CASH PAYMENTS UNTIL SHORTLY BEFORE COMMENCEMENT
OF THE PRICING PERIOD.
In order for payments to be invested on the Investment Date, in addition to
the timely receipt of good funds, the Plan Administrator must be in receipt of
an Authorization Form or a B&N Form, as appropriate, as of the same date. See
Questions 6 and 8.
20. MAY OPTIONAL CASH PAYMENTS BE RETURNED?
Upon telephone or written request to the Plan Administrator received at
least 5 business days prior to the Optional Cash Payment Due Date for the
Investment Date with respect to which optional cash payments have been delivered
to the Plan Administrator, such optional cash payments will be returned to the
Participant as soon as practicable. Requests received less than 5 business days
prior to such date will not returned but instead will be invested on the next
related Investment Date. Additionally, a portion of each optional cash payment
will be returned by check, without interest, as soon as practicable after the
Investment Date for each Trading Day of the Pricing Period that does not meet
the Threshold Price, if any, applicable to optional cash payments made pursuant
to Requests for Waiver. See Question 17. Also, each optional cash payment, to
the extent that it does not either conform to the limitations described in
Question 18 or clear within the time limit described in Question 19, will be
subject to return to the Participant as soon as practicable.
21. ARE THERE ANY EXPENSES TO PARTICIPANTS IN CONNECTION WITH THEIR
PARTICIPATION UNDER THE PLAN?
Participants will incur no brokerage commissions or service charges in
connection with the reinvestment of dividends and in connection with all
purchases made pursuant to optional cash payments under the Plan. The Company
will pay all other costs of administration of the Plan. Additionally,
Participants may elect to send the certificates for their other shares of the
Company's Stock to the Plan Administrator for safekeeping, and there is no fee
for this service. However, Participants who request that the Plan Administrator
sell all or any portion of their shares (see Question 27) must pay a nominal fee
per transaction to the Plan Administrator, any related brokerage commissions and
applicable stock transfer taxes.
REPORT TO PARTICIPANTS
22. WHAT KIND OF REPORTS WILL BE SENT TO PARTICIPANTS IN THE PLAN?
Each Participant in the Plan will receive a statement of his or her account
following each purchase of additional shares. These statements are the
Participant's continuing record of the cost of purchases and should be retained
for income tax purposes. In addition, Participants will receive copies of other
communications sent to holders of the Common Stock, including the Company's
annual report to its shareholders, the notice of annual meeting and proxy
statement in connection with its annual meeting of shareholders and Internal
Revenue Service information for reporting dividends paid.
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DIVIDENDS ON FRACTIONS
23. WILL PARTICIPANT BE CREDITED WITH DIVIDENDS ON FRACTIONS OF SHARES?
Yes.
CERTIFICATES FOR COMMON SHARES
24. WILL CERTIFICATES BE ISSUED FOR SHARES PURCHASED?
Normally, Common Stock purchased for Participants will be held in the name
of the Plan Administrator or its nominee. No certificates will be issued to
Participants for shares in the Plan unless a Participant submits a written
request to the Plan Administrator or until participation in the Plan is
terminated. At any time, a Participant may request the Plan Administrator to
send a certificate for some or all of the whole shares credited to a
Participant's account. This request should be mailed to the Plan Administrator
at the address set forth in the answer to Question 37. There is no fee for this
service. Any remaining whole shares and any fractions of shares will remain
credited to the Plan account. Certificates for fractional shares will not be
issued under any circumstances.
A Participant may also elect to deposit with the Plan Administrator
certificates for the stockholder's other shares of the Company's Stock
registered in his or her name for safekeeping under the Plan without charge.
Because the Participant bears the risk of loss in sending certificates to the
Plan Administrator, certificates should be sent by registered mail, return
receipt requested, and properly insured to the address specified in Question 37
below. If certificates are later issued either upon request of the Participant
or upon termination of participation, new, differently numbered certificates
will be issued.
25. IN WHOSE NAME WILL CERTIFICATES BE REGISTERED WHEN ISSUED?
Each Plan account is maintained in the name in which the related
Participant's certificates were registered at the time of enrollment in the
Plan. Stock certificates for those shares purchased under the Plan will be
similarly registered when issued upon a Participant's request. If a Participant
is a Beneficial Owner, such request must be placed through such Participant's
banker, broker or other nominee. See Question 6. A Participant who wishes to
pledge shares credited to such Participant's Plan account must first withdraw
such shares from the account.
WITHDRAWALS AND TERMINATION
26. WHEN MAY PARTICIPANTS WITHDRAW FROM THE PLAN?
Participants may withdraw from the Plan with respect to all or a portion of
the shares held in his or her account in the Plan at any time. If the request to
withdraw is received prior to a dividend Record Date set by the Board of
Directors for determining shareholders of record entitled to receive a dividend,
the request will be processed on the day following receipt of the request by the
Plan Administrator.
If the request to withdraw is received by the Plan Administrator on or
after a dividend Record Date, but before the payment date, the Plan
Administrator, in its sole discretion, may either pay such dividend in cash or
19
<PAGE> 22
reinvest it in shares for the Participant's account. The request for withdrawal
will then be processed as promptly as possible following such dividend payment
date. All dividends subsequent to such dividend payment date will be paid in
cash unless a shareholder re-enrolls in the Plan, which may be done at any time.
Any optional cash payments which have been sent to the Plan Administrator
prior to a request for withdrawal will also be invested on the next Investment
Date unless a Participant expressly requests return of that payment in the
request for withdrawal, and the request for withdrawal is received by the Plan
Administrator at least 2 business days prior to the 1st day of the Pricing
Period.
27. HOW DOES A PARTICIPANT WITHDRAW FROM THE PLAN?
A Participant who wishes to withdraw from the Plan with respect to all or a
portion of the shares held in his or her account in the Plan must notify the
Plan Administrator in writing at its address set forth in the answer to Question
37. If a Participant withdrawals all the whole shares in their account, they
will receive a cash payment for any fractional shares. Upon a Participant's
withdrawal from the Plan, or termination of the Plan by the Company,
Certificates for the appropriate number of whole shares credited to his or her
account under the Plan will be issued free of charge. A cash payment will be
made for any fractional shares.
Upon withdrawal from the plan, a Participant may also request in writing
that the Plan Administrator sell all or part of the shares credited to his or
her account in the Plan. The Plan Administrator will sell the shares as
requested within 10 business days after processing the request for withdrawal.
The Participant will receive the proceeds of the sale, less a nominal fee per
transaction paid to the Plan Administrator, any brokerage fees or commissions
and any applicable stock transfer taxes, generally within 5 business days of the
sale.
28. ARE THERE ANY AUTOMATIC TERMINATION PROVISIONS?
Participants in the Plan will be terminated if the Plan Administrator
receives written notice of the death or adjudicated incompetency of a
Participant, together with satisfactory supporting documentation of the
appointment of a legal representative at least 5 business days before the next
Record Date for purchases made through the reinvestment of dividends or Optional
Cash Payment Due Date for such payments, as applicable. In the event written
notice of death or adjudicated incompetency and such supporting documentation is
received by the Plan Administrator less than 5 business days before the next
Record Date or Optional Cash Payment Due Date for purchases made through the
reinvestment of dividends or optional cash payments, as applicable, shares will
be purchased for the Participant with the related cash dividend or optional cash
payment and participation in the Plan will not terminate until after such
dividend or payment has been reinvested. Thereafter, no additional purchase of
shares will be made for the Participant's account and the Participant's shares
and any cash dividends paid thereon will be forwarded to such Participant's
legal representative.
Participants in the Plan may be terminated if the number of shares a
Participant has in the Plan drops below 1 share.
20
<PAGE> 23
OTHER INFORMATION
29. WHAT HAPPENS TO A PARTICIPANT'S PLAN SHARES IF THE PARTICIPANT SELLS OR
TRANSFERS ALL COMPANY STOCK REGISTERED IN THE PARTICIPANT'S NAME?
If a Participant who is a Record Holder sells or transfers all of the
shares registered in the Participant's name, the Participant will still remain
in the Plan with respect to any held Plan Shares and will continue to earn
dividends unless the Participant notifies the Plan Administrator to terminate
participation by giving the Plan Administrator a withdrawal notice prior to the
next relevant dividend Record Date. See Question 27.
30. WHAT HAPPENS IF THE COMPANY DECLARES A DIVIDEND PAYABLE IN SHARES OR
DECLARES A STOCK SPLIT?
Any dividend payable in shares and any additional shares distributed by the
Company in connection with a stock split in respect of shares credited to a
Participant's Plan account will be added to that account. Stock dividends or
split shares which are attributable to shares registered in a Participant's own
name and not in his or her Plan account will be mailed directly to the
Participant as in the case of shareholders not participating in the Plan.
31. HOW WILL SHARES HELD BY THE PLAN ADMINISTRATOR BE VOTED AT MEETINGS OF
SHAREHOLDERS?
If the Participant is a Record Owner, the Participant will receive a proxy
card covering both directly held shares and shares held in the Plan. If the
Participant is a Beneficial Owner, the Participant will receive a proxy covering
shares held in the Plan through his or her bank, broker or other nominee.
If a proxy is returned properly signed and marked for voting, all of the
shares covered by the proxy will be voted as marked. If a proxy is returned
properly signed but no voting instructions are given, all of the Participant's
shares will be voted in accordance with recommendations of the Board of
Directors of the Company, unless applicable laws require otherwise. If the proxy
is not returned, or if it is returned unexecuted or improperly executed, shares
registered in a Participant's name may be voted only by the Participant in
person.
32. WHAT ARE THE RESPONSIBILITIES OF THE COMPANY AND THE PLAN ADMINISTRATOR
UNDER THE PLAN?
The Company and the Plan Administrator will not be liable in administering
the Plan for any act done in good faith or required by applicable law or for any
good faith omission to act including, without limitation, any claim of liability
arising out of failure to terminate a Participant's account upon his or her
death, with respect to the price at which shares are purchased and/or the times
when such purchases are made or with respect to any fluctuation in the market
value before or after purchase or sale of shares. Notwithstanding the foregoing,
nothing contained in the Plan limits the Company's liability with respect to
alleged violations of federal securities laws.
The Company and the Plan Administrator shall be entitled to rely on
completed forms and the proof of due authority to participate in the Plan,
without further responsibility of investigation or inquiry.
21
<PAGE> 24
33. MAY THE PLAN BE CHANGED OR DISCONTINUED?
Yes. The Company may suspend, terminate, or amend the Plan at any time.
Notice will be sent to Participants of any suspension or termination, or of any
amendment that alters the Plan terms and conditions, as soon as practicable
after such action by the Company. The Company may also substitute another
administrator or agent in place of the Plan Administrator at any time;
Participants will be promptly informed of any such substitution. Any questions
of interpretation arising under the Plan will be determined by the Company and
any such determination will be final.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
34. WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE PLAN?
The following summary is based upon interpretations of current federal tax
law. IT IS IMPORTANT FOR PARTICIPANTS TO CONSULT THEIR OWN TAX ADVISERS TO
DETERMINE PARTICULAR TAX CONSEQUENCES, including state income tax (and
non-income taxes, such as stock transfer tax) consequences, which vary from
state to state and which may result from participation in the Plan and
subsequent disposition of shares acquired pursuant to the Plan. Income tax
consequences to Participants residing outside the United States will vary from
jurisdiction to jurisdiction.
Dividend Reinvestment program
Participants in the Dividend Reinvestment program under the Plan will be
treated for federal income tax purposes as having received, generally on the
Investment Date, a distribution in an amount equal to the fair market value on
that date of the shares acquired with reinvested dividends. Such shares will
have a tax basis equal to the same amount. For federal income tax purposes, the
fair market value of shares acquired under the Plan will likely be treated as
equal to 100% of the average of the high and low sale prices of shares on the
related Investment Date. The trading value on that specific date may vary from
the Market Price determined under the Plan for such shares.
Such distribution will be taxable as a dividend to the extent of the
Company's current or accumulated earnings and profits. To the extent the
distribution is in excess of the Company's current or accumulated earnings and
profits, the distribution will be treated first as a tax-free return of capital,
reducing the tax basis in a Participant's shares, and the distribution in excess
of a Participant's tax basis will be taxable as gain realized from the sale of
its shares.
22
<PAGE> 25
EXAMPLE 1:
The following example may be helpful to illustrate the federal income tax
consequences of the reinvestment of dividends at a 2% discount from the Market
Price where the fair market value for tax purposes is the same as the Market
Price.
<TABLE>
<S> <C> <C>
Cash dividends reinvested................................... $100.00
Assumed Market Price *...................................... $ 30.00
Less 2% discount per share.................................. $ (0.60)
-------
Net purchase price per share................................ $ 29.40
Number of shares purchased ($100.00/$29.40)................. 3.4014
Total taxable dividend resulting from transaction (30.00 x
3.4014)**................................................. $102.04
</TABLE>
- ---------------
* This price is assumed for illustrative purposes only, and will vary with the
market price of the Common Stock.
** Assumes trading price on Investment Date also equals $30.00.
Stock Purchase program
The taxation of deemed distributions associated with optional cash
purchases is not entirely clear. Participants may be treated as having received
a distribution, upon the purchase of shares with an optional cash payment, in an
amount equal to the excess, if any, of the fair market value of the shares on
the Investment Date over the amount of the optional cash payment. Participants
should be aware that the Company will treat the entire amount of such excess
value as a distribution for tax reporting purposes that is taxable as a
dividend. It is possible, however, that such excess value should not be treated
as a taxable distribution, or if it is, that all or a portion of such
distribution should be treated as a tax-free return of capital. PARTICIPANTS ARE
STRONGLY ENCOURAGED TO CONSULT THEIR OWN TAX ADVISORS IN THIS REGARD.
Shares acquired under the Stock Purchase program under the Plan will have a
tax basis equal to the amount of the payment plus the excess, if any, of the
fair market value of the shares purchased over the amount of the payment. The
fair market value on an Investment Date may differ from the Market Price
determined under the Plan for such shares.
23
<PAGE> 26
EXAMPLE 2:
The following example may be helpful to illustrate the federal income tax
consequences of the optional cash payment feature at a 2% discount from the
Market Price where the fair market value for tax purposes differs from the
Market Price.
<TABLE>
<S> <C> <C>
Optional cash payment....................................... $100.00
Assumed Market Price*....................................... $30.00
Less 2% discount per share.................................. ($0.60)
------
Net purchase price per share................................ $29.40
Number of shares purchased ($100.00/$29.40)................. 3.4014
Total taxable dividend resulting from transaction
(3.4014 X $30.50 - $100.00)**............................. $ 3.74
</TABLE>
- ---------------
* This price is assumed for illustrative purposes only, and will vary with the
market price of Common Stock.
** This example assumes a trading price on the Investment Date of $30.50.
A Participant's holding period for shares acquired pursuant to either
program under the Plan will begin on the day following the Investment Date.
Dividends received by corporate shareholders will not be eligible for the
dividends received deduction.
A Participant will not realize any taxable income upon receipt of
certificates for whole shares credited to the Participant's account, either upon
the Participant's request for certain of those shares or upon termination of
participation in the Plan. A Participant will realize gain or loss upon the sale
or exchange of shares acquired under the Plan. A Participant will also realize
gain or loss upon receipt, following termination of participation in the Plan,
of a cash payment for any fractional share equivalent credited to the
Participant's account. The amount of any such gain or loss will be the
difference between the amount that the Participant received for the shares or
fractional share equivalent and the tax basis thereof.
35. HOW ARE INCOME TAX WITHHOLDING PROVISIONS APPLIED TO SHAREHOLDERS WHO
PARTICIPATE IN THE PLAN?
If a Participant fails to provide certain federal income tax certifications
in the manner required by law, dividends on shares of Common Stock, proceeds
from the sale of fractional shares and proceeds from the sale of shares held for
a Participant's account will be subject to federal income tax withholding at the
rate of 31%. If withholding is required for any reason, the appropriate amount
of tax will be withheld. Certain shareholders (including most corporations) are,
however, exempt from the above withholding requirements.
If a Participant is a foreign shareholder whose dividends are subject to
federal income tax withholding at the 30% rate (or a lower treaty rate), the
appropriate amount will be withheld and the balance in shares will be credited
to such Participant's account.
36. WHO BEARS THE RISK OF MARKET FLUCTUATIONS IN THE COMPANY'S COMMON STOCK?
A Participant's investment in shares held in the Plan account is no
different from his or her investment in directly held shares. The Participant
bears the risk of any loss and enjoys the benefits of any gain from market price
changes with respect to such shares.
24
<PAGE> 27
37. WHO SHOULD BE CONTACTED WITH QUESTIONS ABOUT THE PLAN?
All correspondence regarding the Plan should be directed to:
Mellon Bank, N.A.
c/o ChaseMellon Shareholder Services
P.O. Box 3338
South Hackensack, NJ 07606-1938
Telephone (888) 877-2882
Please mention Redwood Trust, Inc. and this Plan in all correspondence.
38. HOW IS THE PLAN INTERPRETED?
Any questions of interpretation arising under the Plan will be determined
by the Company and any such determination will be final. The Company may adopt
rules and regulations to facilitate the administration of the Plan. The terms
and conditions of the Plan and its operation will be governed by the laws of the
State of California.
39. WHAT ARE SOME OF THE PARTICIPANT RESPONSIBILITIES UNDER THE PLAN?
Plan Shares are subject to escheat to the state in which the Participant
resides in the event that such shares are deemed, under such state's laws, to
have been abandoned by the Participant. Participants, therefore, should notify
the Plan Administrator promptly in writing of any change of address. Account
statements and other communications to Participants will be addressed to them at
the last address of record provided by Participants to the Plan Administrator.
Participants will have no right to draw checks or drafts against their Plan
accounts or to instruct the Plan Administrator with respect to any shares of
Common Stock or cash held by the Plan Administrator except as expressly provided
herein.
DIVIDENDS
The Company has paid dividends since its incorporation. See Schedule A for
a list of anticipated dividend Record and Investment dates through January 21,
2000.
PLAN OF DISTRIBUTION
Except to the extent the Plan Administrator purchases Common Stock in open
market transactions, the Common Stock acquired under the Plan will be sold
directly by the Company through the Plan. The Company may sell Common Stock to
owners of shares (including brokers or dealers) who, in connection with any
resales of such shares, may be deemed to be underwriters. Such shares, including
shares acquired pursuant to waivers granted with respect to the Stock Purchase
program of the Plan, may be resold in market transactions (including coverage of
short positions) on any national security exchange on which shares of Common
Stock trade or in privately negotiated transactions. The Common Stock is
currently listed on the NYSE.
25
<PAGE> 28
Under certain circumstances, it is expected that a portion of the shares of
Common Stock available for issuance under the Plan will be issued pursuant to
such waivers. The difference between the price such owners pay to the Company
for shares of Common Stock acquired under the Plan, after deduction of the
applicable discount from the Market Price, and the price at which such shares
are resold, may be deemed to constitute underwriting commissions received by
such owners in connection with such transactions.
Subject to the availability of shares of Common Stock registered for
issuance under the Plan, there is no total maximum number of shares that can be
issued pursuant to the reinvestment of dividends. From time to time, financial
intermediaries may engage in positioning transactions in order to benefit from
the discount from the Market Price of Common Stock acquired through the
reinvestment of dividends under the Plan.
The Company will pay any and all brokerage commissions and related expenses
incurred in connection with purchases of common Stock under the Plan. Upon
withdrawal by a Participant from the Plan by the sale of Common Stock held under
the Plan, the Participant will receive the proceeds of such sale less a nominal
fee per transaction paid to the Plan Administrator (if such resale is made by
the Plan Administrator at the request of a Participant), any related brokerage
commissions and any applicable transfer taxes.
Common Stock may not be available under the Plan in all jurisdictions. This
Prospectus does not constitute an offer to sell, or a solicitation of an offer
to buy, any Common Stock or other securities in any jurisdiction to any person
to whom it is unlawful to make such offer in such jurisdiction.
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain legal matters
will be passed upon by Tobin & Tobin, a professional corporation, San Francisco,
California. Certain tax matters will be passed on by Giancarlo and Gnazzo, A
Professional Corporation, San Francisco, California.
EXPERTS
The balance sheets as of December 31, 1996 and 1995 and the statements of
operations, stockholders' equity and cash flows for the years ended December 31,
1996 and December 31, 1995 and for the period from August 19, 1994 to December
31, 1994 incorporated by reference in this Prospectus, have been incorporated
herein 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.
26
<PAGE> 29
GLOSSARY
"Beneficial Owners" means shareholders who beneficially own shares of
Company Stock that are registered in a name other than their own (for example,
in the name of a bank, broker or other nominee).
"B&N Form" means a Broker and Nominee form used to permit a Beneficial
Owner's bank, broker or other nominee to participate in the Stock Purchase
program on the Beneficial Owner's behalf.
"business day" means any day other than Saturday, Sunday or legal holiday
on which Nasdaq or another applicable securities exchange is closed or a day on
which the Plan Administrator is authorized or obligated by law to close.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, $.01 par value, of the Company.
"Company" means Redwood Trust, Inc., a Maryland corporation.
"Company Stock" or "Company's Stock" means the Company's Common Stock and
any other classes of equity securities outstanding from time to time,
collectively.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Investment Date" means, with respect to Common Stock acquired pursuant to
a dividend reinvestment, in the case of shares acquired directly from the
Company, the quarterly dividend payment date declared by the Board of Directors
(unless such date is not a business day in which case it is the 1st business day
immediately thereafter) or, in the case of open market purchases, the date or
dates of actual investment, but no later than 10 business days following the
dividend payment date; and with respect to Common Stock acquired pursuant to an
optional cash payment, in the case of shares acquired directly from the Company,
on or about the 21st day of each month; or in the case of open market purchases,
no later than the last business day of each month.
"Market Price" means, with respect to reinvested dividends and optional
cash payments for shares acquired directly from the Company, the average high
and low sales prices, computed to 3 decimal places, of the Common Stock on the
NYSE or another applicable securities exchange, as reported in the Wall Street
Journal, during the Pricing Period (the 10 days on which the NYSE or another
applicable securities exchange is open and for which trades in the Company's
Common Stock are reported immediately preceding the relevant Investment Date,
or, if no trading occurs in the Common Stock on one or more of such days, for
the 10 days immediately preceding the Investment Date for which trades are
reported). With respect to reinvested dividends and optional cash payments for
shares to be acquired on the open market, Market Price means the weighted
average of the actual prices paid, computed to 3 decimal places, for all of the
Common Stock purchased by the Plan Administrator with all Participants'
reinvested dividends and optional cash payments for the related month.
"NYSE" means the New York Stock Exchange.
"Optional Cash Discount" means the discount from the Market Price
applicable to optional cash payments. Such discount will vary between 0% and 2%
of the Market Price (based on a variety of potential considerations as discussed
in Question 17) and may vary from month to month.
"Optional Cash Payment Due Date" means 1 day prior to the relevant Pricing
Period.
27
<PAGE> 30
"Participant" means a Record Owner of the Company's Stock, the Beneficial
Owner of the Company's Stock whose bank, broker or other nominee participates on
the Beneficial Owner's behalf, or a current non-shareholder who wishes to
participate in the Plan upon making an initial investment in the Common Stock
offered herein.
"Plan" means the Redwood Trust, Inc. Dividend Reinvestment and Stock
Purchase Plan.
"Plan Administrator" means a plan administrator that administers the Plan,
keeps records, sends statements of account to each Participant and performs
other duties related to the Plan. Mellon Bank, N.A., currently serves as Plan
Administrator of the Plan.
"Plan Shares" means all shares of Common Stock held in a Participant's
account under the Plan, including shares purchased through the Stock Purchase
program and all whole and fractional shares credited to a Participant's Plan
account as the result of reinvestment of dividends on shares of the Company's
Stock enrolled in the Dividend Reinvestment program.
"Pricing Period" means the period encompassing the 10 days during which the
Common Stock is traded on the NYSE or other securities exchange preceding the
relevant reinvestment or optional cash payment Investment Date.
"Record Date" means, with respect to reinvestments of dividends, the Record
Date declared by the Board of Directors for such dividend.
"Record Owner" means shareholders who own shares of the Company's Stock in
their own names.
"Request for Waiver" means a written request from a Participant to make
optional cash payments in excess of $5,000.
"Securities Act" means the Securities Act of 1933, as amended.
"Threshold Price" means the minimum price, if any, established by the
Company that the average high and low prices of the Common Stock must equal or
exceed during each day of the Pricing Period for optional cash payments made
pursuant to Requests for Waiver.
28
<PAGE> 31
SCHEDULE A
OPTIONAL CASH PAYMENTS:
<TABLE>
<CAPTION>
THRESHOLD PRICE AND OPTIONAL OPTIONAL CASH PRICING PERIOD
CASH DISCOUNT SET DATE PAYMENT DUE DATE COMMENCEMENT DATE INVESTMENT DATE
- ---------------------------- ----------------- ----------------- ------------------
<S> <C> <C> <C>
April 29, 1998 May 6, 1998 May 7, 1998 May 21, 1998
May 29, 1998 June 5, 1998 June 8, 1998 June 22, 1998
June 29, 1998 July 6, 1998 July 7, 1998 July 21, 1998
July 30, 1998 August 6, 1998 August 7, 1998 August 21, 1998
August 27, 1998 September 3, 1998 September 4, 1998 September 21, 1998
September 29, 1998 October 6, 1998 October 7, 1998 October 21, 1998
October 30, 1998 November 6, 1998 November 9, 1998 November 23, 1998
November 27, 1998 December 4, 1998 December 7, 1998 December 21, 1998
December 28, 1998 January 5, 1999 January 6, 1999 January 21, 1999
January 28, 1999 February 4, 1999 February 5, 1999 February 22, 1999
February 26, 1999 March 5, 1999 March 8, 1999 March 22, 1999
March 30, 1999 April 6, 1999 April 7, 1999 April 21, 1999
April 29, 1999 May 6, 1999 May 7, 1999 May 21, 1999
May 27, 1999 June 4, 1999 June 7, 1999 June 21, 1999
June 29, 1999 July 6, 1999 July 7, 1999 July 21, 1999
July 30, 1999 August 6, 1999 August 9, 1999 August 23, 1999
August 27, 1999 September 3, 1999 September 7, 1999 September 21, 1999
September 29, 1999 October 6, 1999 October 7, 1999 October 21, 1999
October 29, 1999 November 5, 1999 November 8, 1999 November 22, 1999
November 29, 1999 December 6, 1999 December 7, 1999 December 21, 1999
December 28, 1999 January 5, 2000 January 6, 2000 January 21, 2000
</TABLE>
DIVIDENDS REINVESTED(1):
<TABLE>
<CAPTION>
COMMON DIVIDENDS PREFERRED DIVIDENDS
- ------------------------------------------------ --------------------------------------
RECORD DATE INVESTMENT DATE RECORD DATE INVESTMENT DATE
- ---------------------------- ----------------- ------------------ -----------------
<S> <C> <C> <C>
May 7, 1998 May 21, 1999 March 31, 1998 April 21, 1998
August 6, 1998 August 21, 1998 June 30, 1998 July 21, 1998
November 5, 1998 November 23, 1998 September 30, 1998 October 21, 1998
December 31, 1998 January 21, 1999 December 31, 1998 January 21, 1999
May 6, 1998 May 21, 1999 March 31, 1999 April 21, 1999
August 5, 1998 August 23, 1999 June 30, 1999 July 21, 1999
November 5, 1998 November 22, 1999 September 30, 1999 October 21, 1999
December 31, 1998 January 21, 2000 December 31, 1999 January 21, 2000
</TABLE>
- ---------------
(1) The dates indicated are those expected to be applicable under the Plan with
respect to future dividends, if and when declared by the Board of Directors.
The actual record and payment dates will be determined by the Board of
Directors and are subject to change.
29
<PAGE> 32
======================================================
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................. 2
Incorporation of Certain Information
by Reference........................ 2
Redwood Trust, Inc. .................. 4
Use of Proceeds....................... 4
Summary of Plan....................... 4
The Plan.............................. 6
Purpose............................... 6
Options Available to Participants..... 7
Advantages and Disadvantages.......... 7
Administration........................ 9
Participation......................... 9
Purchases and Prices of Shares........ 14
Reports to Participants............... 18
Dividends on Fractions................ 19
Certificates for Common Shares........ 19
Withdrawals and Termination........... 19
Other Information..................... 21
Certain Federal Income Tax
Considerations...................... 22
Dividends............................. 25
Plan of Distribution.................. 25
Legal Matters......................... 26
Experts............................... 26
Glossary.............................. 27
Schedule A............................ 29
</TABLE>
======================================================
======================================================
$38,000,000.00
COMMON STOCK
RWT
REDWOOD TRUST, INC.
------------------------
PROSPECTUS
------------------------
DIVIDEND REINVESTMENT
AND
STOCK PURCHASE PLAN
March , 1998
======================================================
<PAGE> 33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered are as set forth below. All
such expenses, except for the SEC registration and filing fees, are estimated:
<TABLE>
<S> <C>
SEC Registration . . . . . . . . . . . . . . . . $13,104.00
Legal Fees and Expenses . . . . . . . . . . . . $15,000.00
Accounting Fees and Expenses . . . . . . . . . . $ 2,000.00
Printing and Engraving Fees . . . . . . . . . . $40,000.00
Miscellaneous . . . . . . . . . . . . . . . . . $24,896.00
Total . . . . . . . . . . . . . . . . . . . . . $95,000.00
</TABLE>
Item 15. Indemnification of Directors and Officers.
Section 2-418 of the Corporations and Associations Article of
the Annotated Code of Maryland provides that a Maryland corporation may
indemnify any director of the corporation and any person who, while a
director of the corporation, is or was serving at the request of the
corporation as a director, officer, partner, trustee, employee, or
agent of another foreign or domestic corporation, partnership, joint
venture, trust, or other enterprise or employee benefit plan, is made a
party to any proceeding by reason of service in that capacity unless it
is established that the act or omission of the director was material to
the matter giving rise to the proceeding and was committed in bad faith
or was the result of active and deliberate dishonesty; or the director
actually received an improper personal benefit in money, property or
services; or, in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful.
Indemnification may be against judgments, penalties, fines,
settlements, and reasonable expenses actually incurred by the director
in connection with the proceeding, but if the proceeding was one by or
in the right of the corporation, indemnification may not be made in
respect of any proceeding in which the director shall have been
adjudged to be liable to the corporation. Such indemnification may not
be made unless authorized for a specific proceeding after a
determination has been made, in the manner prescribed by the law, that
indemnification is permissible in the circumstances because the
director has met the applicable standard of conduct. On the other hand,
the director must be indemnified for expenses if he has been successful
in the defense of the proceeding or as otherwise ordered by a court.
The law also prescribes the circumstances under which the corporation
may advance expenses to, or obtain insurance or similar protection for,
directors.
The law also provides for comparable indemnification for
corporate officers and agents.
The Registrant's Articles of Incorporation provide that its
directors and officers shall, and its agents in the discretion of the
Board of Directors may, be indemnified to the fullest extent required
or permitted from time to time by the laws of Maryland.
The Maryland GCL permits the charter of a Maryland corporation
to include a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages
except to the extent that (i) it is proved that the person actually
received an improper benefit or profit in money, property or services
for the amount of the benefit or profit in money, property or services
actually received, or (ii) a judgment or other final adjudication is
entered in a proceeding based on a finding that the person's action, or
failure to act, was the result of active and deliberate dishonesty and
was material to the cause of action adjudicated in the proceeding. The
Company's Articles of Incorporation contain a provision providing for
elimination of the liability of its directors and officers to the
Company or its stockholders for money damages to the maximum extent
permitted by Maryland law from time to time.
<PAGE> 34
Item 16. Exhibits.
5.1 Opinion of Tobin & Tobin, a professional corporation, as to
legality (including consent of such firm)
8.1 Opinion of Giancarlo & Gnazzo, A Professional Corporation, as
to certain tax matters (including consent of such firm)
23.1 Consent of Tobin & Tobin (included in Exhibit 5.1)
23.3 Consent of Giancarlo & Gnazzo, A Professional Corporation
(included in Exhibit 8.1)
23.4* Consent of Coopers & Lybrand L.L.P., independent accountants.
24.1** Power of Attorney (set forth on signature page)
99.1 Form of Authorization form
99.2** Form of Broker & Nominee form
99.3** Form of Request for Waiver form
- ---------
* Incorporated by reference to Exhibit 23.1 to the Company's Form 10-K/A, filed
April 2, 1997.
** Previously filed.
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in the periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of Prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of Prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
of 1933 shall be deemed to be part of this Registration Statement as of the time
it was declared effective; and (2) for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that contains a
form of Prospectus shall be deemed to be a new Registration Statement relating
to the
II-2
<PAGE> 35
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities begin
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Post-Effective Amendment No. 1 to the 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 March , 1998.
REDWOOD TRUST, INC.
By: /s/ George E. Bull III
--------------------------------------------------
George E. Bull, III
(Chairman of the Board and Chief Executive Officer)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT NO. 1 TO THE FORM S-3 REGISTRATION STATEMENT HAS BEEN
SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
Signature Position Date
--------- -------- ----
<S> <C> <C>
/s/ George E. Bull III Chairman of the Board, Chief March , 1998
- ------------------------------- Executive Officer and Director
George E. Bull, III (Principal Executive Officer)
/s/ Douglas B. Hansen* President, Chief Financial March , 1998
- ------------------------------- Officer and Director
Douglas B. Hansen (Principal Financial Officer)
/s/ Frederick H. Borden* Vice Chairman of the Board, March , 1998
- ------------------------------- Secretary and Director
Frederick H. Borden
/s/ Vickie L. Rath* Vice President, Treasurer and March , 1998
- ------------------------------- Controller (Principal Accounting
Vickie L. Rath Officer)
/s/ Dan A. Emmett*
- ------------------------------- Director March , 1998
Dan A. Emmett
/s/ Thomas F. Farb* Director March , 1998
- -------------------------------
Thomas F. Farb
/s/ Nello Gonfiantini* Director March , 1998
- -------------------------------
Nello Gonfiantini
/s/ Charles J. Toeniskoetter* Director March , 1998
- -------------------------------
Charles J. Toeniskoetter
By: /s/ George E. Bull III
---------------------------
Attorney-in-fact
</TABLE>
II-4
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibt Description Page
------ ----------- ----
<S> <C> <C>
5.1 Opinion of Tobin & Tobin, a professional corporation, as to
legality (including consent of such firm)
8.1 Opinion of Giancarlo & Gnazzo, A Professional Corporation, as
to certain tax matters (including consent of such firm)
23.1 Consent of Tobin & Tobin (included in Exhibit 5.1)
23.3 Consent of Giancarlo & Gnazzo, A Professional Corporation
(included in Exhibit 8.1)
23.4* Consent of Coopers & Lybrand L.L.P., independent accountants.
24.1** Power of Attorney (set forth on signature page)
99.1 Form of Authorization form
99.2** Form of Broker & Nominee form
99.3** Form of Request for Waiver form
</TABLE>
- ---------
* Incorporated by reference to Exhibit 23.1 to the Company's Form 10-K/A, filed
April 2, 1997.
** Previously filed.
<PAGE> 1
EXHIBIT 5.1
[TOBIN & TOBIN LETTERHEAD]
March 5, 1998
The Board of Directors
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
Re: Post-Effective Amendment No. 1 to the Dividend Reinvestment
and Stock Purchase Plan Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as your counsel in connection with the public offering by
Redwood Trust, Inc., a Maryland corporation (the "Company"), of shares (the
"Shares") of the Company's common stock, par value $0.01 per share ("Common
Stock"), with an aggregate value of $38,000,000 pursuant to the Company's
Dividend Reinvestment and Stock Purchase Plan (the "Plan"). The Plan as amended
to date is described in Post-Effective Amendment No. 1 to the Registration
Statement on Form S-3 being filed with the Securities Exchange Commission (the
"Commission") on the date hereof.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Securities Act").
In connection with this opinion, we have examined and are familiar with
originals or copies, certified or otherwise identified to our satisfaction, of
(i) the original Registration Statement on Form S-3, relating to the Common
Stock and the Plan, filed with the Commission under the Securities Act on
December 17, 1996 (Registration No. 333- 18061)(together with all amendments
thereof and exhibits thereto, the "Registration Statement"); (ii) Post-Effective
Amendment No. 1 to the Registration Statement, being filed with the Commission
under the Securities Act of even date herewith (together with all amendments
thereof and exhibits thereto, "Amendment No. 1"); (iii) the Articles of
Incorporation of the Company, including all amendments and supplements thereto
(collectively, the "Articles of Incorporation"); (iv) the Bylaws, as amended, of
the Company; and (v) resolutions of the Board of Directors of the Company
relating to the filing of the
<PAGE> 2
The Board of Directors
Redwood Trust Inc.
March 5, 1998
Page 2
Registration Statement and the issuance of the Shares pursuant to the Plan. 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 with respect to certain matters of Maryland law.
Based upon and subject to the foregoing, we are of the opinion and
advise you that appropriate corporate action has been taken by the Company to
authorize the issuance of the Common Stock, that the Common Stock has been duly
established in accordance with the terms of the Company's Articles of
Incorporation and applicable law, and, upon issuance, delivery and payment
therefor in the manner contemplated by the Plan, the Shares will be validly
issued, fully paid and non-assessable.
We hereby consent to the reliance on this opinion by Giancarlo &
Gnazzo, A Professional Corporation, tax counsel to the Company, in rendering
their opinion to the Company in connection with the Registration Statement. We
also hereby consent to the filing of this opinion with the Commission as Exhibit
5.1 to the Registration Statement and to the reference to our firm under the
heading "Legal Matters" in the Registration Statement. In giving such consent,
we do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or under the rules and
regulations of the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ Tobin & Tobin
<PAGE> 1
EXHIBIT 8.1
[GIANCARLO & GNAZZO LETTERHEAD]
March 5, 1998
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
Re: Redwood Trust, Inc. Registration Statement on Form S-3 for
Dividend Reinvestment and Stock Purchase Plan
Dear Ladies and Gentlemen:
You have requested our opinion in connection with the Post Effective
Amendment No. 1 to Form S-3 Registration Statement (the "Registration
Statement") being filed by Redwood Trust, Inc. (the "Company") on the date
hereof with respect to its Dividend Reinvestment and Stock Purchase Plan (the
"Plan").
In connection with the Registration Statement, we have acted as your
special tax counsel and have assisted in the preparation of the tax summary for
such Registration Statement. In formulating our opinions, we have reviewed (i)
the Registration Statement, (ii) the Articles of Incorporation for of each the
Company and its wholly owned subsidiary, Sequoia Mortgage Funding Corporation
("Sequoia"), as amended and supplemented, (iii) the Bylaws of the Company and
Sequoia, 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 matters including the
prior, current and future methods of operation of the Company and Sequoia. We
have also relied upon the opinion of Tobin & Tobin, a professional corporation,
dated on or about the date hereof, with respect to certain matters of corporate
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 and Sequoia have been
<PAGE> 2
Redwood Trust, Inc.
March 5, 1998
Page 2
and will continue to be organized and operated in the manner described in the
Officer's Certificate, the Registration Statement, and the other relevant
documents referred to above; and (ii) there have been no changes in the
applicable laws of the States of Maryland or Delaware, 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 and Sequoia which may not be achievable if there are
future changes in the circumstances of the Company or Sequoia 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:
1. 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, 1997, the date of the most recent unaudited financial statements
of the Company reviewed by us, and the Company's current and contemplated
methods of operation, as described in the Registration Statement and as
represented by the Company, will enable it to continue to so qualify; and
2. Although the discussion set forth under the caption "Certain Federal
Income Tax Considerations" in the Form S-3 does not purport to discuss all
possible Federal income tax consequences of the acquisition and ownership of the
Company's Common Stock acquired under the Plan, such discussion constitutes, in
all material respects, an accurate summary of the Federal income tax
considerations that are likely to be material to a participant in the Plan.
Other than as expressly stated above, we express no opinion on any issue
relating to the Company, to Sequoia, 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 hereby consent to the filing of this opinion as
an Exhibit to the Registration Statement.
Very truly yours,
/s/ Giancarlo & Gnazzo,
A Professional Corporation
<PAGE> 1
EXHIBIT 99.1
NOT TO BE USED BY BENEFICIAL STOCKHOLDERS
(EXCEPT TO MAKE OPTIONAL CASH PAYMENTS)
SEE PROSPECTUS, QUESTIONS 5, 6 AND 8
Authorization Form for
Redwood Trust, Inc.
Dividend Reinvestment and
Stock Purchase Plan
-------------------
This form, when completed and signed,
should be mailed to:
Mellon Bank, N.A.
c/o ChaseMellon Shareholder Services
P.O. Box 3339, South Hackensack, NJ 07606
IS THIS ACCOUNT FOR AN EXISTING STOCKHOLDER? Yes[ ] No[ ]
--- ---
================================================================================
1. ACCOUNT REGISTRATION
Complete only one of the following four registration types, A, B, C or D:
Print clearly in CAPITAL LETTERS.
A. Individual or Joint Account
OWNER'S NAME:_____________________________________________________________
OWNER'S SOCIAL SECURITY NO. OWNER'S DATE OF BIRTH
(used for tax reporting) Month Day Year
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ] [ ][ ]/[ ][ ]/[ ][ ]
--------- ------ ------------ ------ ------ ------
JOINT OWNER'S NAME:_______________________________________________________
JOINT OWNER'S SOCIAL SECURITY NO. THE ACCOUNT WILL BE REGISTERED
(used for tax reporting) "JOINT TENANTS WITH RIGHTS OF
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ] SURVIVORSHIP" UNLESS YOU CHECK
--------- ------ ------------ A BOX:
[ ] Tenants in common
---
[ ] Tenants by entirety
---
[ ] Community property
---
B. Gift Transfer to a Minor (UGMA/UTMA)
CUSTODIAN'S NAME:__________________________________________________________
MINOR'S NAME:______________________________________________________________
MINOR'S SOCIAL SECURITY NO. MINOR'S DATE OF BIRTH DONOR'S
(REQUIRED) [ ][ ]/[ ][ ]/[ ][ ] STATE
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ] ------ ------ ------ [ ][ ]
--------- ------ ------------ ------
C. Trust (Please check only one of the trustee types)
[ ] Person as trustee [ ] Organization as trustee
--- ---
TRUSTEE: INDIVIDUAL OR ORGANIZATION NAME:__________________________________
AND CO-TRUSTEE'S NAME, IF APPLICABLE:______________________________________
NAME OF TRUST:_____________________________________________________________
FOR THE BENEFIT OF:________________________________________________________
TRUST TAXPAYER I.D. NO.: [ ][ ]-[ ][ ][ ][ ][ ][ ][ ]
------ ---------------------
TRUST DATE: [ ][ ]/[ ][ ]/[ ][ ] DONOR'S STATE: [ ][ ]
------ ------ ------ ------
D. Organization or Business Entity (check one): [ ] CORPORATION
---
[ ] PARTNERSHIP
---
[ ] OTHER
---
NAME OF ENTITY:____________________________________________________________
TRUST TAXPAYER I.D. NO.: [ ][ ]-[ ][ ][ ][ ][ ][ ][ ]
------ ---------------------
================================================================================
E. ADDRESS
___________________________________________________________________________
Street Address (including apartment or box number)
___________________________________________________________________________
City State Zip
Home phone: Work Phone:
( ) - ( ) -
--- --- ---- --- --- ----
For mailing address outside the United States:
___________________________________________________________________________
County of Residence Province Routing or Postal Code
I hereby appoint Mellon Bank, N.A. (the "Plan Administrator"), or its
successor as appointed by Redwood Trust, Inc. (the "Company"), as my agent,
subject to the terms and conditions of the Company's Dividend Reinvestment
and Stock Purchase Plan (the "Plan"). I wish to participate in the Plan as
directed below.
<PAGE> 2
- --------------------------------------------------------------------------------
3. OPTIONAL CASH PURCHASE (Make checks payable to Mellon Bank, N.A.)
[ ] As a CURRENT registered stockholder I wish to make an optional cash
payment. Enclosed is my check or money order for $ . (Minimum $500
with the maximum not to exceed $5,000 per month, except by seeking the
Company's permission for a higher investment through the separate
submission of the Request for Waiver Form.)
[ ] As a NEW Investor (or a current Beneficial Stockholder) I wish to
enroll in the Plan by making an optional cash payment. Enclosed is my
check or money order for $ . (Investment must be at least $500
not to exceed $5,000, except by seeking the Company's permission for
a higher investment through the separate submission of the Request for
Waiver Form.)
YOU MUST ALSO COMPLETE SECTIONS 1, 2, 4 AND 6.
- --------------------------------------------------------------------------------
4. REINVESTMENT OPTIONS
[ ] NO REINVESTMENT
Please enroll my shares in The Plan as indicated below.
[ ] FULL DIVIDEND REINVESTMENT -
Please apply dividends on all shares of the Company's Stock
registered in my name, held in my Plan account, or acquired
with optional cash payments to the purchase of additional
shares of the Company's common stock.
[ ] PARTIAL DIVIDEND REINVESTMENT -
Please apply the dividends on shares of the Company's
Stock registered in my name, held in my Plan account, or
acquired with optional cash payments to the purchase of
additional shares of the Company's common stock.
UNLESS OTHERWISE SPECIFIED, ALL SHARES REGISTERED IN YOUR NAME WILL BE
ENROLLED IN THE FULL DIVIDEND REINVESTMENT PROGRAM.
- --------------------------------------------------------------------------------
5. SAFEKEEPING
COMMON STOCK CERTIFICATES DEPOSITED FOR SAFEKEEPING IN YOUR ACCOUNT MUST
BE IN THE SAME REGISTRATION AS YOUR PLAN ACCOUNT.
[ ] Please accept the enclosed certificate(s) for safekeeping. Enclosed
are share certificates.
THE ENCLOSED CERTIFICATES SHOULD BE SENT BY CERTIFIED or REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED.
CERTIFICATE NUMBER NO. OF SHARES CERTIFICATE NUMBER NO. OF SHARES
------------------- ------------- ------------------- -------------
------------------- ------------- ------------------- -------------
------------------- ------------- ------------------- -------------
- --------------------------------------------------------------------------------
6. ACCOUNT AUTHORIZATION SIGNATURE AND DATE (REQUIRED); SELECT ONE:
==========
[ ] REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (SUBSTITUTE FORM W-9)
I am a citizen or a resident alien. I certify, under penalties of perjury,
that (1) the taxpayer identification number in Section 1 is correct (or I
am waiting for a number to be issued to me) and (CROSS OUT THE FOLLOWING
IF NOT TRUE) (2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service that I am subject to backup withholding as a
result of failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
[ ] CERTIFICATE OF FOREIGN STATUS (SUBSTITUTE FORM W-8)
I am an exempt foreign citizen. I certify, under penalties of perjury,
that for dividends, I am not a U.S. citizen or resident alien (or I
am filing for a foreign corporation, partnership, estate, or trust)
and I am an exempt foreign person. I have entered in Section 2 of this
enrollment form the country where I reside permanently for income-tax
purposes.
[ ] FOR ORGANIZATIONS AND BUSINESS ENTITIES EXEMPT FROM BACKUP
WITHHOLDING
I qualify for exemption and my account will not be subject to tax
reporting and backup withholding.
MY/OUR SIGNATURE(S) BELOW INDICATES I/WE HAVE READ THE COMPANY'S DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN AS SET FORTH IN THE ACCOMPANYING
PROSPECTUS, RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, AND I/WE AGREE TO THE
TERMS THEREIN AND HEREIN.
- ------------------------------------- ---------------------------------
SIGNATURE OF OWNER DATE (MONTH, DATE, YEAR)
- ------------------------------------- ---------------------------------
SIGNATURE OF JOINT OWNER DATE (MONTH, DATE, YEAR)
THIS FORM WILL NOT BE PROCESSED UNLESS AT LEAST SECTIONS 1, 2, 4 & 6 ARE
COMPLETED.
<PAGE> 1
EXHIBIT 99.3
REQUEST FOR WAIVER
REDWOOD TRUST, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
This form is to be used by Participants in the Redwood Trust, Inc. ("Redwood")
Dividend Reinvestment and Stock Purchase Plan (the "Plan") who are requesting
authorization from Redwood to make an optional cash payment under the Plan in
excess of the $5,000 monthly maximum.
A new form must be completed each month the Participant wishes to make an
optional cash payment in excess of the $5,000 monthly maximum. This form will
not be accepted by Redwood unless it is completed in its entirety.
The Participant submitting this form hereby certifies that (a) the information
contained herein is true and correct as of the date of this form; (b) the
Participant has received a current copy of the Prospectus relating to the Plan
(the "Prospectus") and (c) the Participant must submit a copy of this Request
for Waiver (approved by Redwood) to Mellon Bank, N.A. at the same time an
Authorization Form and/or Broker and Nominee Form and the optional cash payment
are submitted by the Participant.
For information regarding the discount (if any) and threshold price (if any)
that may be applicable to optional cash payments made pursuant to an approved
Request for Waiver, please call (415) 380-2304 within five (5) business days
before the applicable Optional Cash Payment Due Date. THIS FORM SHOULD THEN BE
COMPLETED AND RETURNED (VIA FACSIMILE) TO REDWOOD TRUST, INC., ATTENTION: VICE
PRESIDENT AND TREASURER, FAX NUMBER (415) 381-1773, by 10:00 a.m. Pacific Time
no later than two (2) business days prior to the Optional Cash Payment Due Date
for the applicable Investment Date. If approved by the Company, the approved
copy of this form must be returned with full payment on the Optional Cash
Payment Due Date. See Question 17 to the Prospectus for further information.
- ----------------------------------------------------------
Date
- ----------------------------------------------------------
Participant's Signature
- ----------------------------------------------------------
Participant's Signature
- ----------------------------------------------------------
Print Name as it Appears on Share Certificate
(or Name of Beneficial Stockholder)
- ----------------------------------------------------------
Print Name as it Appears on Share Certificate
(or Account Number and Location of
Shares Held by Beneficial Stockholder)
- ----------------------------------------------------------
Optional Cash Payment Amount Requested
- ----------------------------------------------------------
Social Security or Tax I.D. Number
- ----------------------------------------------------------
Street Address
- ----------------------------------------------------------
City State Zip
- ----------------------------------------------------------
Phone Number
- ----------------------------------------------------------
Fax Number
Please certify if you are currently participating in the dividend reinvestment
component of the plan. Yes / / No / /
Method of Payment: _____ Check _____ Money Order _____ Other* (Specify)______
* Payment by other than Check or Money Order requires approval of Redwood.
APPROVED BY REDWOOD TRUST, INC.
- ----------------------------------------------------------
Optional Cash Payment Amount Approved
Method of Payment Approved:
---------------------------------------------------
Threshold Price, if any:
---------------------------------------------------
Applicable Waiver Discount:
---------------------------------------------------
By:
---------------------------------------------------
Name:
-------------------------------------------------
Title:
-------------------------------------------------
Date:
-------------------------------------------------
This Request for Waiver may be withdrawn by the Participant in accordance with
the terms of the Plan.
