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SEC Filings

424B1
DITECH HOLDING CORP filed this Form 424B1 on 09/16/1997
Entire Document
 
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     HCHI will own all of the HCP Preferred but will generally have no right to
control the affairs of HCP, HCMC and HCS (other than to approve certain
fundamental transactions such as mergers, consolidations, sales of all or
substantially all assets, and voluntary liquidation) because the HCP Preferred
is nonvoting. Instead, as the holders of all of the HCP Common, the Principals
will control the operations and affairs of HCP, HCMC and HCS. This ownership
structure is required because, as a REIT, HCHI generally may not own more than
10% of the voting securities of any other issuer. See "Federal Income Tax
Considerations -- Requirements for Qualification as a REIT -- Nature of Assets."
Accordingly, the purchasers of Units in the Offering will not own an interest in
any entity that controls HCP, HCMC or HCS.
 
     HCP will make dividend distributions on a quarterly basis to the extent
consistent with HCHI's qualification as a REIT. For purposes of receiving
dividends, there is no difference between a share of the HCP Preferred and a
share of the HCP Common, so that the HCP Preferred will have no dividend rate or
preference over the HCP Common. Instead, dividend distributions by HCP will be
made in the same amount per share of HCP Preferred and HCP Common. Accordingly,
each dividend distribution by HCP will be made to HCHI and the Principals in
proportion to the numbers of shares held by them (so that, initially, each
dividend distribution will be made 97% to HCHI and 3% to the Principals). As the
holder of the HCP Preferred, however, based on a price of the Common Stock in
the Offering of $15.00 per share, HCHI will have the right to receive
$10,750,005 (up to $15,750,010 if the Earn-Out fully vests) in HCP's liquidation
before any other shareholders receive anything. Thus, the Principals will
control the operations and affairs of HCP, HCMC and HCS but will have rights to
receive only 3% of any dividend distribution made by HCP. See "Risk
Factors -- Principals' Conflicts of Interest." Shares of HCP Common held by a
Principal may be repurchased if, among other things, the Principal ceases to be
employed by the Company or to own an interest in HCHI. See "-- The Formation of
HCHI -- Benefits to the Principals" and "Certain Transactions -- The HCP
Shareholders' Agreement.
 
THE FORMATION OF HCHI
 
     Structure of HCP and Subsidiaries Prior to the Consummation of the
Formation Transactions
 
     Historically, HCP has owned interests in other entities in addition to HCMC
and HCS. Some of those entities are inactive, have no value and will be
dissolved and terminated before the closing of the Offering (or as soon
thereafter as reasonably possible). Four of the entities may still own assets at
the time of the closing of the Offering. Two of the entities (Alpine/Hanover LLC
and ABH-I LLC) were formed with institutional investors (Alpine Associates in
the case of Alpine/Hanover LLC; Alpine/Hanover LLC and BT Realty Resources, Inc.
in the case of ABH-I LLC), to engage in mortgage loan trading activities with
HCP acting as asset manager entitled to receive up to 50% of profits depending
upon performance. The third entity (Alpine/Hanover II, L.L.C.) was formed with
Alpine Associates, a Limited Partnership, to trade non-mortgage receivables with
HCP acting as sole asset manager entitled to receive up to 50% of profits
depending upon performance. The fourth entity (AGR Financial, L.L.C.) was formed
with an unaffiliated individual (who acted as the managing member) to invest and
trade in receivables of temporary employment agencies with HCP as a 25% passive
investor.
 
     HCP will transfer its interests in Alpine/Hanover II, L.L.C. and AGR
Financial, L.L.C. to an entity owned by the Principals before the closing of the
Offering. Although HCP will retain its interests in Alpine/Hanover LLC and ABH-I
LLC, it will distribute to the Principals before the closing of the Offering its
rights to any receivables from those entities arising between June 30, 1997 and
the closing of the Offering. HCP has also separately managed assets for BT
Realty Resources, Inc. pursuant to a management contract entitling it to receive
up to 50% of profits depending upon performance. HCP will wind down its
activities under that contract but, as of the time of the closing of the
Offering, may not have completed the disposition of all of the managed assets.
HCP will distribute to the Principals before the closing of the Offering its
rights to any receivables arising between June 30, 1997 and the closing of the
Offering under its management contract with BT Realty Resources, Inc. The
receivables to be distributed are expected to approximate $1,000,000 in the
aggregate. Except in satisfaction of any notes that it has contributed to the
limited liability companies, HCP is not obligated to make further contributions
to any of the limited liability companies.
 
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