As
filed with the Securities and Exchange Commission on August 6, 2010
Registration No.
333-_______
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM S-3
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
Redwood
Trust, Inc.
Redwood
Capital Trust II
(Exact
names of registrants as specified in their charters)
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Redwood
Trust, Inc.
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Redwood
Capital Trust II
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Maryland
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Delaware
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(State
or other jurisdiction of
incorporation
or organization)
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(State
or other jurisdiction of
incorporation
or organization)
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68-0329422
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27-6733708
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(I.R.S.
Employer Identification Number)
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(I.R.S.
Employer Identification
Number)
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One
Belvedere Place, Suite 300
Mill
Valley, CA 94941
(415)
389-7373
(Address,
including zip code, and telephone number, including area code, of each
registrant’s principal executive offices)
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Martin
S. Hughes
President
and Chief Executive Officer
Redwood
Trust, Inc.
One
Belvedere Place, Suite 300
Mill
Valley, CA 94941
(415)
389-7373
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Copies
to:
Keith
Benson, Esq.
Latham
& Watkins LLP
505
Montgomery Street, Suite 2000
San
Francisco, CA 94111
(415)
391-0600
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(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Approximate date of commencement of
proposed sale to the public: At any time and from time to time after this
Registration Statement becomes effective.
If the
only securities being registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, please check the following box. o
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. o
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. o
If this
Form is a registration statement pursuant to General Instruction I.D. or a
post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. x
If this
Form is a post-effective amendment to a registration statement filed pursuant to
General Instruction I.D. filed to register additional securities or additional
classes of securities pursuant to Rule 413(b) under the Securities Act, check
the following box. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer x
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Accelerated
filer o
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Non-accelerated
filer o
(Do
not check if a smaller reporting company)
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Smaller reporting
company o
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CALCULATION
OF REGISTRATION FEE
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Title
of Each Class of Securities to be Registered
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Amount
to be
Registered(1)(2)
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Proposed
Maximum
Offering
Price Per
Unit(1)(2)
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Proposed
Maximum
Aggregate
Offering
Price(1)(2)
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Amount
of
Registration
Fee(3)
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Debt
Securities, Common Stock, Preferred Stock, Warrants, Stockholder Rights,
Units(4)
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Trust
Preferred Securities
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Guarantees
of Trust Preferred Securities
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Total
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(1)
Omitted pursuant to Form S-3 General Instruction II.E.
(2) An
unspecified number of the securities of each identified class of securities is
being registered for possible issuance from time to time at indeterminate
prices. Separate consideration may or may not be received for securities that
are issuable on exercise, conversion or exchange of other securities or that are
issued in units. In accordance with Rules 456(b) and 457(r) under the Securities
Act, we are deferring payment of all applicable registration fees.
(3)
Deferred in reliance upon Rule 456(b) and Rule 457(r).
(4) Debt
Securities may be issued and sold to Redwood Capital Trust II, in which event
such debt securities may later be distributed to the holders of trust preferred
securities upon a dissolution of Redwood Capital Trust II and the distribution
of its assets.
PROSPECTUS
Redwood
Trust, Inc.
Debt
Securities
Common
Stock
Preferred
Stock
Warrants
Stockholder
Rights
Units
Redwood
Capital Trust II
Trust
Preferred Securities
fully
and unconditionally guaranteed by
Redwood
Trust, Inc.
We may
from time to time offer, in one or more classes or series, separately or
together, and in amounts, at prices and on terms to be set forth in one or more
supplements to this prospectus, the following securities:
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debt
securities, which may consist of debentures, notes, or other types of
debt;
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shares
of our common stock;
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shares
of our preferred stock;
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warrants
to purchase shares of our common stock or preferred
stock;
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rights
issuable to our stockholders to purchase shares of our common stock or
preferred stock, to purchase warrants exercisable for shares of our common
stock or preferred stock, or to purchase units consisting of two or more
of the foregoing;
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trust
preferred securities; and
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units
consisting of two or more of the
foregoing.
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We refer
to the debt securities, common stock, preferred stock, warrants, rights, trust
preferred securities and units registered hereunder collectively as the
“securities” in this prospectus. The specific terms of each series or class of
the securities will be set forth in the applicable prospectus supplement and
will include, where applicable:
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·
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in
the case of debt securities, the specific title, aggregate principal
amount, currency, form (which may be certificated or global), authorized
denominations, maturity, rate (or manner of calculating the rate) and time
of payment of interest, terms for redemption at our option or repayment at
the holder’s option, terms for sinking payments, terms for conversion into
shares of our common stock or preferred stock, covenants, and any initial
public offering price;
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in
the case of preferred stock, the specific designation, preferences,
conversion and other rights, voting powers, restrictions, limitations as
to transferability, dividends and other distributions, and terms and
conditions of redemption and any initial public offering
price;
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in
the case of warrants or rights, the duration, offering price, exercise
price, and detachability;
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in
the case of trust preferred securities, the designation, annual
distribution rate, distribution payment dates, whether distributions will
be cumulative and compounding, amounts paid out of assets of the trust to
holders upon dissolution, any repurchase, redemption or exchange
provisions, any preference or subordination rights upon a default or
liquidation, any voting rights, terms for any conversion or exchange, and
any rights to defer distributions;
and
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in
the case of units, the constituent securities comprising the units, the
offering price, and detachability.
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In
addition, the specific terms may include limitations on actual or constructive
ownership and restrictions on transfer of the securities, in each case as may be
appropriate to preserve the status of our company as a real estate investment
trust, or REIT, for federal income tax purposes. The applicable prospectus
supplement will also contain information, where applicable, about certain United
States federal income tax consequences relating to, and any listing on a
securities exchange of, the securities covered by such prospectus supplement.
You should read this prospectus and any prospectus supplement carefully before
you invest in any of our securities.
The
securities may be offered directly by us or by any selling security holder,
through agents designated from time to time by us or to or through underwriters
or dealers. If any agents, dealers, or underwriters are involved in the sale of
any of the securities, their names, and any applicable purchase price, fee,
commission, or discount arrangement between or among them will be set forth, or
will be calculable from the information set forth, in the applicable prospectus
supplement. See the sections entitled “Plan of Distribution” and “About This
Prospectus” for more information. No securities may be sold without delivery of
this prospectus and the applicable prospectus supplement describing the method
and terms of the offering of such series of securities.
Our
common stock currently trades on the New York Stock Exchange, or NYSE, under the
symbol “RWT”. On August 5, 2010, the last reported sale price of our common
stock was $14.70
per share.
Investing
in the securities involves risk. See “Risk Factors” beginning on page
1.
This
prospectus may not be used to offer or sell any securities unless accompanied by
a prospectus supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is August 6, 2010
TABLE
OF CONTENTS
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Page
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About
This Prospectus
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1
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Risk
Factors
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3
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Cautionary
Statement
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4
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Redwood
Trust, Inc.
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5
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Use
of Proceeds
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6
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Accounting
Treatment Relating to Trust Preferred Securities
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6
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Ratios
of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred
Stock Dividends
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6
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General
Description of Securities
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7
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Description
of Debt Securities
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7
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Description
of Common Stock
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14
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Description
of Preferred Stock
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15
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Description
of Securities Warrants
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16
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Description
of Rights to Purchase Shares of Common or Preferred Stock
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17
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Description
of Trust Preferred Securities
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18
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Description
of Units
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23
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Restrictions
on Ownership and Transfer and Repurchase of Shares
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24
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Certain
Provisions of Maryland Law and of Our Charter and Bylaws
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26
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Material
U.S. Federal Income Tax Considerations
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28
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Plan
of Distribution
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37
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Validity
of the Securities
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38
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Experts
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39
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Incorporation
of Certain Information by Reference
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39
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Where
You Can Find More Information
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40
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You
should rely only on the information contained or incorporated by reference in
this prospectus and any accompanying prospectus supplement. We have not
authorized anyone else to provide you with different or additional information.
We are offering to sell the securities and seeking offers to buy the securities
only in jurisdictions where offers and sales are permitted.
We have not authorized any dealer or
other person to give any information or to make any representation other than
those contained or incorporated by reference in this prospectus and any
accompanying supplement to this prospectus. You must not rely upon any
information or representation not contained or incorporated by reference in this
prospectus or any accompanying supplement to this prospectus. This prospectus
and any accompanying supplement to this prospectus do not constitute an offer to
sell or the solicitation of an offer to buy any securities other than the
registered securities to which they relate, nor do this prospectus and any
accompanying supplement to this prospectus constitute an offer to sell or the
solicitation of an offer to buy securities in any jurisdiction to any person to
whom it is unlawful to make such offer or solicitation in such jurisdiction. You
should not assume that the information contained in this prospectus and any
accompanying supplement to this prospectus is accurate on any date subsequent to
the date set forth on the front of the document or that any information we have
incorporated by reference is correct on any date subsequent to the date of the
document incorporated by reference, even though this prospectus and any
accompanying supplement to this prospectus is delivered or securities are sold
on a later date.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, using a “shelf” registration process. Under
this shelf registration process, we may sell the securities described in this
prospectus in one or more offerings. This prospectus sets forth certain terms of
the securities that we may offer.
Each time
we offer securities, we will attach a prospectus supplement to this prospectus.
The prospectus supplement will contain the specific description of the terms of
the offering. The prospectus supplement will supersede this prospectus to the
extent it contains information that is different from, or that conflicts with,
the information contained in this prospectus.
It is
important for you to read and consider all information contained in this
prospectus and the applicable prospectus supplement, including the information
incorporated by reference herein and therein, in making your investment
decision. You should also read and consider the information contained in the
documents identified under the heading “Where You Can Find More Information” in
this prospectus.
We have
not included separate financial statements of Redwood Capital Trust II, a
special purpose entity, in this prospectus. We do not consider that such
financial statements are material to holders of the trust preferred securities
because:
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the
trust has no operating history or independent operations;
and
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the
trust is not engaged in, nor will it engage in, any activity other than
issuing trust preferred and trust common securities, investing in and
holding our debt securities and engaging in related
activities.
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Furthermore,
the combination of our obligations under the debt securities, the associated
indentures, the trust agreement and the guarantees provide a full, irrevocable
and unconditional guarantee of payments of distributions and other amounts due
on the trust preferred securities. In addition, we do not expect that Redwood
Capital Trust II will file reports with the SEC under the Securities Exchange
Act of 1934.
Unless
otherwise indicated or unless the context requires otherwise, all references in
this prospectus to “we”, “us”, “our” or “Redwood” mean Redwood Trust, Inc. and
our consolidated subsidiaries, except where it is made clear that the terms mean
Redwood Trust, Inc. only.
Redwood
Capital Trust II was formed solely for the purpose of issuing trust preferred
securities and has no operating history or independent
operations. Redwood Capital Trust II was created under the Delaware
Statutory Trust Act and will be governed by a trust agreement (as it may be
amended and restated from time to time) among the trustees of Redwood Capital
Trust II and us. The trust agreement will be qualified under the Trust Indenture
Act of 1939, as amended.
When
Redwood Capital Trust II issues its trust preferred securities, the holders of
the trust preferred securities will own all of the issued and outstanding trust
preferred securities of Redwood Capital Trust II. We will acquire all
of the issued and outstanding trust common securities of Redwood Capital Trust
II, representing an undivided beneficial interest in the assets of Redwood
Capital Trust II of at least 3%.
Redwood
Capital Trust II exists primarily for the purpose of:
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issuing
its trust preferred and trust common
securities;
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investing
the proceeds from the sale of its securities in our debt securities;
and
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engaging
in only such other activities as are necessary or incidental to issuing
its securities and purchasing and holding our debt
securities.
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When
Redwood Capital Trust II issues its trust preferred securities, the number of
trustees of Redwood Capital Trust II will initially be four. Two of the
trustees will be individuals who are officers or employees of
Redwood. The third trustee will be Wells Fargo Bank, N.A., which will serve
as the property trustee under the trust agreement for purposes of the Trust
Indenture Act of 1939, as amended. The fourth trustee will be Wells
Fargo Delaware Trust Company, N.A., which has its principal place of business in
the State of Delaware.
Wells
Fargo Bank, N.A., acting in its capacity as guarantee trustee, will hold for
your benefit a trust preferred securities guarantee, which will be separately
qualified under the Trust Indenture Act of 1939, as amended.
-1-
Unless
otherwise provided in the applicable prospectus supplement, because we will own
all of the trust common securities of Redwood Capital Trust II, we will have the
exclusive right to appoint, remove or replace trustees and to increase or
decrease the number of trustees. In most cases, there will be at least four
trustees. The term of Redwood Capital Trust II’s amended and restated trust
agreement will be described in the applicable prospectus supplement, but may
dissolve earlier as provided in the trust agreement.
The
rights of holders of the trust preferred securities of Redwood Capital Trust II,
including economic rights, rights to information and voting rights and the
duties and obligations of the trustees of Redwood Capital Trust II, will be
contained in and governed by the trust agreement of Redwood Capital Trust II (as
it may be amended and restated from time to time), the Delaware Statutory Trust
Act and the Trust Indenture Act of 1939.
Our
executive offices are located at One Belvedere Place, Suite 300, Mill Valley,
California 94941; our telephone number is (415) 389-7373.
-2-
RISK
FACTORS
You
should carefully consider any specific risks set forth under the caption “Risk
Factors” in the applicable prospectus supplement and under the caption “Risk
Factors” in our most recent annual report on Form 10-K and subsequent quarterly
reports on Form 10-Q, incorporated into this prospectus by reference, as updated
by our subsequent filings under the Securities Exchange Act of 1934, as amended,
or the Exchange Act. You should consider carefully those risk factors together
with all of the other information included and incorporated by reference in this
prospectus before you decide to purchase our securities.
-3-
CAUTIONARY
STATEMENT
This
prospectus and the documents incorporated by reference herein contain
forward-looking statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements involve
numerous risks and uncertainties. Our actual results may differ from our
beliefs, expectations, estimates, and projections and, consequently, you should
not rely on these forward-looking statements as predictions of future events.
Forward-looking statements are not historical in nature and can be identified by
words such as “anticipate,” “estimate,” “will,” “should,” “expect,” “believe,”
“intend,” “seek,” “plan,” and similar expressions or their negative forms, or by
references to strategy, plans, or intentions. These forward-looking statements
are subject to risks and uncertainties, including, among other things, those
described in this prospectus and any accompanying prospectus supplement under
the caption “Risk Factors.” Other risks, uncertainties, and factors that could
cause actual results to differ materially from those projected are summarized
below and described from time to time in reports we file with the SEC, including
under the heading “Risk Factors” in our most recent annual report on Form 10-K
and subsequent quarterly reports on Form 10-Q and current reports on
Form 8-K. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Important
factors, among others, that may affect our actual results include: general
economic trends, the performance of the housing, mortgage, credit, and broader
financial markets, and their effects on the prices of earning assets and the
credit status of borrowers; federal and state legislative and regulatory
developments, and the actions of governmental authorities, including those
affecting the mortgage industry or our business; our exposure to credit risk and
the timing of credit losses within our portfolio; the concentration of the
credit risks we are exposed to, including due to the structure of assets we hold
and the geographical concentration of real estate underlying assets we own; our
exposure to adjustable-rate and negative amortization mortgage loans; the
efficacy and expense of our efforts to manage or hedge credit risk, interest
rate risk, and other financial and operational risks; changes in credit ratings
on assets we own and changes in the rating agencies’ credit rating
methodologies; changes in interest rates; changes in mortgage prepayment rates;
the availability of high-quality assets for purchase at attractive prices and
our ability to reinvest cash we hold; changes in the values of assets we own;
changes in liquidity in the market for real estate securities; our ability to
finance the acquisition of real estate-related assets with short-term debt; the
ability of counterparties to satisfy their obligations to us; our involvement in
securitization transactions and the risks we are exposed to in executing
securitization transactions; exposure to litigation arising from our involvement
in securitization transactions; whether we have sufficient liquid assets to meet
short-term needs; our ability to successfully compete for and retain or attract
key personnel; our ability to adapt our business model and strategies to
changing circumstances; changes in our investment, financing, and hedging
strategies and new risks we may be exposed to if we expand our business
activities; exposure to environmental liabilities and the effects of global
climate change; failure to comply with applicable laws and regulations; our
failure to maintain appropriate internal controls over financial reporting and
disclosure controls and procedures; changes in accounting principles and tax
rules; our ability to maintain our status as a real estate investment trust
(REIT) for tax purposes; limitations imposed on our business due to our REIT
status and our status as exempt from registration under the Investment Company
Act of 1940; decisions about raising, managing, and distributing capital; and
other factors not presently identified.
-4-
REDWOOD
TRUST, INC.
Redwood
Trust, Inc., together with its subsidiaries, is a financial institution that
seeks to invest in real estate-related assets that have the potential to provide
attractive cash flows over a long period of time and support our goal of
distributing attractive levels of dividends to our stockholders. For tax
purposes, we are structured as a real estate investment trust, or REIT. We are
able to pass through substantially all of our earnings generated at our REIT to
our stockholders without paying income tax at the corporate level. We pay income
tax on the REIT taxable income we retain and on the income we earn at our
taxable subsidiaries.
Our
primary source of income is typically net interest income, which consists of the
interest income we earn from our investments less the interest expenses we incur
on our borrowed funds and other liabilities. Our primary real estate investments
include investments in real estate loans and securities, an investment in a
private fund that we sponsor – Redwood Opportunity Fund, LP (the
Fund) – and investments in securitization entities that we
sponsor – the Sequoia entities and the Acacia entities (which we may
collectively refer to as Sequoia and Acacia, respectively). We assume
a range of risks in our investments and the level of risk is influenced by the
manner in which we finance our purchases of, and derive income from, our
investments.
Our
direct investments in residential, commercial, and collateralized debt
obligations (CDO) securities are currently financed with equity and long-term
debt, although we may use short-term debt financing from time to time, and we
may pledge our securities to borrow short-term to fund loans to the extent our
securities are more liquid collateral. These investments are primarily senior
and subordinate mortgage-backed securities backed by residential and commercial
real estate loans. The long term focus of our operations is to invest in
subordinate securities (often below investment grade) that have concentrated
structural credit risk. More recently, we have been investing in senior
securities (often investment-grade), which have the first right to cash flows in
a securitization and therefore have less concentrated credit risk than
subordinate securities.
The
entities that we sponsor — the Fund, Sequoia, and
Acacia — invest in real estate assets. Assets held at the Fund include
senior securities backed by non-prime residential and CDO collateral, which were
funded through the sale of limited partnership interests to us and to third
party investors. Assets held at the Sequoia entities include
residential real estate loans, which are funded through the issuance of ABS to
us and to third party investors. Assets held at the Acacia entities include real
estate securities, and some loans and other mortgage related investments, which
are funded through the issuance of ABS and equity to us and to third party
investors.
Our
investments in Sequoia and Acacia entities are currently financed with equity
and long-term debt. Our capital at risk is limited to our investments in these
entities as each entity is independent of Redwood and of each other and the
assets and liabilities are not owned by and are not obligations of Redwood. For
financial reporting purposes, we are generally required to consolidate these
entities’ and the Fund’s assets, liabilities, and non-controlling
interests.
Redwood
was incorporated in the State of Maryland on April 11, 1994, and commenced
operations on August 19, 1994. Our executive offices are located at One
Belvedere Place, Suite 300, Mill Valley, California 94941.
-5-
USE
OF PROCEEDS
Unless
otherwise specified in the applicable prospectus supplement for any offering of
securities, we intend to use the net proceeds from the sale of securities for
the acquisition of real estate assets and for general corporate purposes.
Pending such uses, we may use the net proceeds from the sale of any securities
to reduce short-term indebtedness.
ACCOUNTING
TREATMENT RELATING TO TRUST PREFERRED SECURITIES
The
financial statements of Redwood Capital Trust II will be consolidated with our
financial statements. Following the issuance of trust preferred securities by
Redwood Capital Trust II, our financial statements will include a footnote that
discloses, among other things, that the assets of the trust consist of our debt
securities and will specify the designation, principal amount, interest rate and
maturity date of the debt securities.
RATIOS
OF EARNINGS TO FIXED CHARGES AND
EARNINGS
TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Our ratio
of earnings to fixed charges and ratio of earnings to fixed charges and
preferred stock dividends for the six months ended June 30, 2010 and each of the
previous five years ended December 31 were as follows:
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Six
Months
Ended
June 30,
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Year Ended December 31,
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2010
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2009
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2008
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2007
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2006
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2005
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Ratio
of earnings to fixed charges
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2.92 | x | 1.26 | x | (0.08 | )x | (0.69 | )x | 1.20 | x | 1.29 | x | ||||||||||||
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Ratio
of earnings to fixed charges and preferred stock dividends
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2.92 | x | 1.26 | x | (0.08 | )x | (0.69 | )x | 1.20 | x | 1.29 | x | ||||||||||||
The ratio
of earnings to fixed charges represents the number of times “fixed charges” are
covered by “earnings.” “Fixed charges” consist of interest on outstanding asset
backed securities issued and debt and amortization of debt discount and expense.
The proportion deemed representative of the interest factor of operating lease
expense has not been deducted as the total operating lease expense in itself was
de minimis and did not affect the ratios in a material way. “Earnings” consist
of consolidated income before income taxes and fixed charges.
For the
year ended December 31, 2007, consolidated income before income taxes was
insufficient to cover fixed charges by approximately $1.1 billion. For the year
ended December 31, 2008, consolidated income before income taxes was
insufficient to cover fixed charges by approximately $450
million.
-6-
GENERAL
DESCRIPTION OF SECURITIES
The
following is a brief description of the material terms of our securities that
may be offered under this prospectus. This description does not purport to be
complete and is subject in all respects to applicable Maryland law and to the
provisions of our charter and bylaws, including any amendments or supplements
thereto, copies of which are on file with the SEC as described under “Where You
Can Find Information” and are incorporated by reference herein.
We,
directly or through agents, dealers, or underwriters designated from time to
time, may offer, issue, and sell, together or separately:
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debt
securities, which may consist of debentures, notes, or other types of
debt;
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shares
of our common stock;
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shares
of our preferred stock;
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warrants
to purchase shares of our common stock or preferred
stock;
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rights
issuable to our stockholders to purchase shares of our common stock or
preferred stock, to purchase warrants exercisable for shares of our common
stock or preferred stock, or to purchase units consisting of two or more
of the foregoing;
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trust
preferred securities; and
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units
consisting of two or more of the
foregoing.
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We may
issue the debt securities as exchangeable for or convertible into shares of
common stock, preferred stock, or other securities. The preferred stock may also
be exchangeable for and/or convertible into shares of common stock, another
series of preferred stock, or other securities. The debt securities, the
preferred stock, the common stock, the warrants, the rights, the trust preferred
securities and the units are collectively referred to in this prospectus as the
securities. When a particular series of securities is offered, a supplement to
this prospectus will be delivered with this prospectus, which will set forth the
terms of the offering and sale of the offered securities.
Our
charter provides that we have authority to issue up to 100,000,000 shares of
stock, par value $0.01 per share, all of which is currently classified as common
stock. Our common stock is listed on the New York Stock Exchange, and we intend
to so list any additional shares of our common stock which are issued and sold
hereunder. We may elect to list any future class or series of our securities
issued hereunder on an exchange, but we are not obligated to do so. Under
Maryland law, our stockholders generally are not liable for our debts or
obligations.
DESCRIPTION
OF DEBT SECURITIES
The debt
securities covered by this prospectus will be our debt securities issued under
an indenture to be entered into between us and a trustee to be identified in the
applicable prospectus supplement. This prospectus, together with the applicable
prospectus supplement, will describe all the material terms of a particular
series of debt securities. Unless otherwise specified in a supplement to this
prospectus, the debt securities will be our direct, unsecured obligations and
will rank equally with all of our other unsecured and unsubordinated
indebtedness.
The
following is a summary of the most important provisions and definitions of the
form of indenture we intend to enter into with a trustee. The summary is not
complete. The form of the indenture has been filed as an exhibit to the
registration statement and you should read the indenture for provisions that may
be important to you. Capitalized terms used in the summary have the meaning
specified in the indenture.
In this
description of debt securities, the words “we”, “us”, or “our” refer only
Redwood Trust, Inc. and not to any of our subsidiaries.
-7-
General
Debt
securities may be issued in separate series without limitation as to aggregate
principal amount. We may specify a maximum aggregate principal amount for the
debt securities of any series.
The
prospectus supplement will set forth:
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whether
the debt securities will be senior or
subordinated;
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the
offering price;
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the
form and terms of any guarantee of any debt
securities;
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the
title;
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any
limit on the aggregate principal
amount;
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the
person who shall be entitled to receive interest, if other than the record
holder on the record date;
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the
date the principal will be payable;
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the
interest rate, if any, the date interest will accrue, the interest payment
dates, and the regular record
dates;
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the
place where payments may be made;
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any
mandatory or optional redemption
provisions;
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if
applicable, the method for determining how the principal, premium, if any,
or interest will be calculated by reference to an index or
formula;
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if
other than U.S. currency, the currency or currency units in which
principal, premium, if any, or interest will be payable, whether we or the
holder may elect payment to be made in a different currency and the manner
in which the exchange rate with respect to these payments will be
determined;
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the
denominations in which the debt securities will be issued, if other than
denominations of $1,000 and any integral multiple
thereof;
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whether
the debt securities will be issued in bearer or fully registered form (and
if in fully registered form, whether the debt securities will be issuable,
in whole or in part, as global debt
securities);
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the
portion of the principal amount that will be payable upon acceleration of
stated maturity, if other than the entire principal
amount;
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if
the principal amount payable at stated maturity will not be determinable
as of any date prior to stated maturity, the amount which will be deemed
to be the principal amount;
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any
defeasance provisions if different from those described below under
“Satisfaction and Discharge;
Defeasance”;
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any
conversion or exchange provisions;
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any
obligation to redeem or purchase the debt securities pursuant to a sinking
fund;
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whether
the debt securities will be issuable in the form of a global
security;
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any
subordination provisions;
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any
deletions of, or changes or additions to, the events of default or
covenants; and
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any
other specific terms of such debt
securities.
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Unless
otherwise specified in the prospectus supplement:
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the
debt securities will be registered debt securities;
and
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registered
debt securities denominated in U.S. dollars will be issued in
denominations of $2,000 and an integral multiple of $1,000
thereafter.
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Debt
securities may be sold at a substantial discount below their stated principal
amount, bearing no interest or interest at a rate which at the time of issuance
is below market rates.
-8-
Exchange
and Transfer
Debt
securities may be transferred or exchanged at the office of the security
registrar or at the office of any transfer agent designated by us.
We will
not impose a service charge for any transfer or exchange, but we may require
holders to pay any tax or other governmental charges associated with any
transfer or exchange.
In the
event of any potential redemption of debt securities of any series, we will not
be required to:
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issue,
register the transfer of, or exchange, any debt security of that series
during a period beginning at the opening of business 15 days before the
day of mailing of a notice of redemption and ending at the close of
business on the day of the mailing;
or
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register
the transfer of or exchange any debt security of that series selected for
redemption, in whole or in part, except the unredeemed portion being
redeemed in part.
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We may
initially appoint the trustee as the security registrar. Any transfer agent, in
addition to the security registrar, initially designated by us will be named in
the prospectus supplement. We may designate additional transfer agents or change
transfer agents or change the office of the transfer agent. However, we will be
required to maintain a transfer agent in each place of payment for the debt
securities of each series.
Global
Securities
The debt
securities of any series may be represented, in whole or in part, by one or more
global securities. Each global security will:
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be
registered in the name of a depositary that we will identify in a
prospectus supplement;
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be
deposited with the depositary or nominee or custodian;
and
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bear
any required legends.
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No global
security may be exchanged in whole or in part for debt securities registered in
the name of any person other than the depositary or any nominee
unless:
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the depositary has notified us that it is unwilling or unable to continue as depositary or has ceased to be qualified to act as depositary; | |
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an
event of default is continuing;
or
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any
other circumstances described in a prospectus supplement
occurs.
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As long
as the depositary, or its nominee, is the registered owner of a global security,
the depositary or nominee will be considered the sole owner and holder of the
debt securities represented by the global security for all purposes under the
indenture. Except in the above limited circumstances, owners of beneficial
interests in a global security:
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will
not be entitled to have the debt securities registered in their
names;
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will
not be entitled to physical delivery of certificated debt securities;
and
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will
not be considered to be holders of those debt securities under the
indenture.
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Payments
on a global security will be made to the depositary or its nominee as the holder
of the global security. Some jurisdictions have laws that require that certain
purchasers of securities take physical delivery of such securities in definitive
form. These laws may impair the ability to transfer beneficial interests in a
global security.
Institutions
that have accounts with the depositary or its nominee are referred to as
“participants.” Ownership of beneficial interests in a global security will be
limited to participants and to persons that may hold beneficial interests
through participants. The depositary will credit, on its book-entry registration
and transfer system, the respective principal amounts of debt securities
represented by the global security to the accounts of its
participants.
-9-
Ownership
of beneficial interests in a global security will be shown on and effected
through records maintained by the depositary, with respect to participants’
interests, or any participant, with respect to interests of persons held by
participants on their behalf.
Payments,
transfers, and exchanges relating to beneficial interests in a global security
will be subject to policies and procedures of the depositary.
The
depositary policies and procedures may change from time to time. Neither we nor
the trustee will have any responsibility or liability for the depositary’s or
any participant’s records with respect to beneficial interests in a global
security.
Payment
and Paying Agent
The
provisions of this paragraph will apply to the debt securities unless otherwise
indicated in the prospectus supplement. Payment of interest on a debt security
on any interest payment date will be made to the person in whose name the debt
security is registered at the close of business on the regular record date.
Payment on debt securities of a particular series will be payable at the office
of a paying agent or paying agents designated by us. However, at our option, we
may pay interest by mailing a check to the record holder. The corporate trust
office will be designated as our sole paying agent.
We may
also name any other paying agents in the prospectus supplement. We may designate
additional paying agents, change paying agents, or change the office of any
paying agent. However, we will be required to maintain a paying agent in each
place of payment for the debt securities of a particular series.
All
moneys paid by us to a paying agent for payment on any debt security which
remain unclaimed at the end of two years after such payment was due will be
repaid to us. Thereafter, the holder may look only to us for such
payment.
Consolidation,
Merger, and Sale of Assets
Except as
otherwise set forth in the applicable prospectus supplement, we may not
consolidate with or merge into any other person in a transaction in which we are
not the surviving corporation, or convey, transfer, or lease our properties and
assets substantially as an entirety to any person, unless:
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the
successor, if any, is a U.S. corporation, limited liability company,
partnership, trust, or other
entity;
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the
successor assumes our obligations on the debt securities and under the
indenture;
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immediately
after giving effect to the transaction, no default or event of default
shall have occurred and be continuing;
and
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certain
other conditions are met.
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Events
of Default
Unless we
inform you otherwise in the prospectus supplement, the indenture will define an
event of default with respect to any series of debt securities as one or more of
the following events:
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(1)
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failure
to pay principal of or any premium on any debt security of that series
when due;
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(2)
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failure
to pay any interest on any debt security of that series for 30 days when
due;
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(3)
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failure
to deposit any sinking fund payment within 30 days of when
due;
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(4)
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failure
to perform any other covenant in the indenture continued for 90 days after
being given the notice required in the
indenture;
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(5)
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our
bankruptcy, insolvency, or reorganization;
and
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(6)
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any
other event of default specified in the prospectus
supplement.
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An event
of default of one series of debt securities is not necessarily an event of
default for any other series of debt securities.
-10-
If an
event of default, other than an event of default described in clause (5) above,
shall occur and be continuing, either the trustee or the holders of at least 25%
in aggregate principal amount of the outstanding securities of that series may
declare the principal amount of the debt securities of that series to be due and
payable immediately.
If an
event of default described in clause (5) above shall occur, the principal amount
of all the debt securities of that series will automatically become immediately
due and payable.
After
acceleration the holders of a majority in aggregate principal amount of the
outstanding securities of that series may, under certain circumstances, rescind
and annul such acceleration if all events of default, other than the non-payment
of accelerated principal, or other specified amount, have been cured or
waived.
Other
than the duty to act with the required care during an event of default, the
trustee will not be obligated to exercise any of its rights or powers at the
request of the holders unless the holders shall have offered to the trustee
reasonable indemnity. Generally, the holders of a majority in aggregate
principal amount of the outstanding debt securities of any series will have the
right to direct the time, method, and place of conducting any proceeding for any
remedy available to the trustee or exercising any trust or power conferred on
the trustee.
A holder
will not have any right to institute any proceeding under the indenture, or for
the appointment of a receiver or a trustee, or for any other remedy under the
indenture, unless:
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(1)
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the
holder has previously given to the trustee written notice of a continuing
event of default with respect to the debt securities of that
series;
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(2)
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the
holders of at least 25% in aggregate principal amount of the outstanding
debt securities of that series have made a written request and have
offered reasonable indemnity to the trustee to institute the proceeding;
and
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(3)
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the
trustee has failed to institute the proceeding and has not received
direction inconsistent with the original request from the holders of a
majority in aggregate principal amount of the outstanding debt securities
of that series within 60 days after the original
request.
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Holders
may, however, sue to enforce the payment of principal, premium, or interest on
any debt security on or after the due date or to enforce the right, if any, to
convert any debt security without following the procedures listed in (1) through
(3) above.
We will
furnish the trustee an annual statement by our officers as to whether or not we
are in default in the performance of the indenture and, if so, specifying all
known defaults.
Modification
and Waiver
Except as
provided in the next two succeeding paragraphs, we and the trustee may make
modifications and amendments to the indenture (including, without limitation,
through consents obtained in connection with a purchase of, or tender offer or
exchange offer for, outstanding securities) and may waive any existing default
or event of default (including, without limitation, through consents obtained in
connection with a purchase of, or tender offer or exchange offer for,
outstanding securities) with the consent of the holders of a majority in
aggregate principal amount of the outstanding securities of each series affected
by the modification or amendment.
However,
neither we nor the trustee may make any modification or amendment without the
consent of the holder of each outstanding security of that series affected by
the modification or amendment if such modification or amendment
would:
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change
the stated maturity of any debt
security;
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reduce
the principal of, premium, if any, on or interest on any debt
security;
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reduce
the principal of an original issue discount security or any other debt
security payable on acceleration of
maturity;
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reduce
the rate of or extend the time for payment of interest on any debt
security;
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change
the currency in which any debt security is
payable;
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impair
the right to enforce any payment after the stated maturity or redemption
date;
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-11-
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waive
any default or event of default in payment of the principal of, premium on
or interest on any debt security;
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waive
a redemption payment or modify any of the redemption provisions of any
debt security;
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adversely
affect the right, if any, to convert any debt security;
or
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change
the provisions in the indenture that relate to modifying or amending the
indenture.
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Notwithstanding
the preceding, without the consent of any holder of outstanding securities, we
and the trustee may amend or supplement the indenture:
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to
cure any ambiguity, defect, or
inconsistency;
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to
provide for uncertificated securities in addition to or in place of
certificated securities;
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to
provide for the assumption of our obligations to holders of any debt
security in the case of a merger or consolidation or sale of all or
substantially all of our assets;
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to
make any change that would provide any additional rights or benefits to
the holders of securities or that does not adversely affect the legal
rights under the indenture of any such
holder;
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to
comply with requirements of the SEC in order to effect or maintain the
qualification of an indenture under the Trust Indenture
Act;
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to
conform the text of the indenture to any provision of the Description of
Debt Securities to the extent that such provision in the Description of
Debt Securities was intended to be a verbatim recitation of a provision of
the indenture;
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to
provide for the issuance of additional securities in accordance with the
limitations set forth in the indenture as of the date of the
indenture;
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to
allow any guarantor to execute a supplemental indenture with respect to
debt securities and to release guarantors in accordance with the terms of
the indenture; or
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to
add additional obligors under the indenture and the
securities.
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The
consent of holders is not necessary under the indenture to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment.
Satisfaction
and Discharge; Defeasance
Legal
Defeasance. The indenture provides that, unless otherwise
provided by the terms of the applicable series of debt securities, we may be
discharged from any and all obligations in respect of the debt securities of any
series (except for certain obligations to register the transfer or exchange of
debt securities of such series, to replace stolen, lost, or mutilated debt
securities of such series, and to maintain paying agencies and certain
provisions relating to the treatment of funds held by paying agents). We will be
so discharged upon the deposit with the trustee, in trust, of money and/or U.S.
government obligations or, in the case of debt securities denominated in a
single currency other than U.S. dollars, foreign government obligations, that,
through the payment of interest and principal in accordance with their terms,
will provide money in an amount sufficient in the opinion of a nationally
recognized firm of independent public accountants to pay and discharge each
installment of principal, premium, and interest on and any mandatory sinking
fund payments in respect of the debt securities of that series on the stated
maturity of those payments in accordance with the terms of the indenture and
those debt securities.
This
discharge may occur only if, among other things, we have delivered to the
trustee an opinion of counsel stating that we have received from, or there has
been published by, the United States Internal Revenue Service a ruling or, since
the date of execution of the indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that, and based thereon such opinion shall confirm that, the holders of the debt
securities of that series will not recognize income, gain, or loss for United
States federal income tax purposes as a result of the deposit, defeasance, and
discharge and will be subject to United States federal income tax on the same
amounts and in the same manner and at the same times as would have been the case
if the deposit, defeasance, and discharge had not occurred.
-12-
Defeasance of Certain
Covenants. The indenture provides that, unless otherwise
provided by the terms of the applicable series of debt securities, upon
compliance with certain conditions:
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we
may omit to comply with the covenant described under the heading
“Consolidation, Merger, and Sale of Assets” and certain other covenants
set forth in the indenture, as well as any additional covenants which may
be set forth in the applicable prospectus supplement;
and
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any
omission to comply with those covenants will not constitute a default or
an event of default with respect to the debt securities of that series, or
covenant defeasance.
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The
conditions include:
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depositing
with the trustee money and/or U.S. government obligations or, in the case
of debt securities denominated in a single currency other than U.S.
dollars, foreign government obligations, that, through the payment of
interest and principal in accordance with their terms, will provide money
in an amount sufficient in the opinion of a nationally recognized firm of
independent public accountants to pay and discharge each installment of
principal of, premium and interest on and any mandatory sinking fund
payments in respect of the debt securities of that series on the stated
maturity of those payments in accordance with the terms of the indenture
and those debt securities; and
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delivering
to the trustee an opinion of counsel to the effect that the holders of the
debt securities of that series will not recognize income, gain, or loss
for United States federal income tax purposes as a result of the deposit
and related covenant defeasance and will be subject to United States
federal income tax on the same amounts and in the same manner and at the
same times as would have been the case if the deposit and related covenant
defeasance had not occurred.
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Covenant Defeasance and Events of
Default. In the event we exercise our option to effect
covenant defeasance with respect to any series of debt securities and the debt
securities of that series are declared due and payable because of the occurrence
of any event of default, the amount of money and/or U.S. government obligations
or foreign government obligations on deposit with the trustee will be sufficient
to pay amounts due on the debt securities of that series at the time of their
stated maturity but may not be sufficient to pay amounts due on the debt
securities of that series at the time of the acceleration resulting from the
event of default. However, we shall remain liable for those
payments.
Notices
Notices
to holders will be given by mail to the addresses of the holders in the security
register.
Governing
Law
The
indenture and the debt securities will be governed by, and construed under, the
laws of the State of New York.
Regarding
the Trustee
The
indenture limits the right of the trustee, should it become a creditor of us, to
obtain payment of claims or secure its claims.
The
trustee is permitted to engage in certain other transactions. However, if the
trustee acquires any conflicting interest, and there is a default under the debt
securities of any series for which they are trustee, the trustee must eliminate
the conflict or resign.
-13-
DESCRIPTION
OF COMMON STOCK
All
shares of common stock offered by this prospectus will be duly authorized, fully
paid, and nonassessable. Holders of our common stock are entitled to receive
dividends if, as, and when authorized by our board of directors and declared by
us out of assets legally available for the payment of dividends. They are also
entitled to share ratably in our assets legally available for distribution to
our stockholders in the event of our liquidation, dissolution, or winding up,
after payment of or adequate provision for all of our known debts and
liabilities. These rights are subject to the preferential rights of any other
class or series of our stock and to the provisions of our charter regarding
restrictions on transfer of our stock.
Subject
to our charter restrictions on transfer of our stock, each outstanding share of
common stock entitles the holder to one vote on all matters submitted to a vote
of stockholders, including the election of directors. Except as provided with
respect to any other class or series of stock, the holders of our common stock
will possess the exclusive voting power. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding shares of common stock can elect all of the directors then standing
for election, and the holders of the remaining shares will not be able to elect
any directors.
Holders
of our common stock have no preference, conversion, exchange, sinking fund,
redemption, or, if listed on the New York Stock Exchange, appraisal rights and
have no preemptive rights to subscribe for any of our securities. Subject to our
charter restrictions on transfer of our stock, all shares of common stock will
have equal dividend, liquidation, and other rights.
Transfer
Agent, Registrar, and Dividend Disbursing Agent
The
transfer agent and registrar for our common stock is currently Computershare
Trust Company, N.A. and its affiliate, Computershare Inc., acts as dividend
disbursing agent.
Power
to Reclassify Shares of Our Stock; Issuance of Additional Shares
Our
charter authorizes our board of directors to classify and reclassify from time
to time any unissued shares of our stock into other classes or series of stock,
including preferred stock, and to cause the issuance of such shares. Prior to
issuance of shares of each class or series, the board of directors is required
by Maryland law and by our charter to set, subject to our charter restrictions
on transfer of our stock, the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each class or series.
We believe that the power to issue additional shares of common stock or
preferred stock and to classify or reclassify unissued shares of common or
preferred stock and thereafter to issue the classified or reclassified shares
provides us with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs which might arise. These actions can
be taken without stockholder approval, unless stockholder approval is required
by applicable law or the rules of any stock exchange or automated quotation
system on which our securities may be listed or traded. Although we have no
present intention of doing so, we could issue a class or series of stock that
could delay, defer, or prevent a transaction or a change in control of Redwood
Trust that might involve a premium price for holders of common stock or
otherwise be in their best interest. We have no shares of preferred stock
presently outstanding.
-14-
DESCRIPTION
OF PREFERRED STOCK
Our
charter authorizes our board of directors to classify from time to time any
unissued shares of stock in one or more classes or series of preferred stock and
to reclassify any previously classified but unissued preferred stock of any
class or series in one or more classes or series. If we offer preferred stock
pursuant to this prospectus in the future, the applicable prospectus supplement
will describe the terms of such preferred stock, including the following, where
applicable:
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the
designation of the shares and the number of shares that constitute the
class or series;
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the
dividend rate (or the method of calculating dividends), if any, on the
shares of the class or series and the priority as to payment of dividends
with respect to other classes or series of our shares of
stock;
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whether
dividends will be cumulative or non-cumulative and, if cumulative, the
date from which dividends on the preferred stock will
accumulate;
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the
dividend periods (or the method of calculating the dividend
periods);
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the
voting rights of the preferred stock, if
any;
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the
liquidation preference and the priority as to payment of the liquidation
preference with respect to other classes or series of our stock and any
other rights of the shares of the class or series upon our liquidation or
winding-up;
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whether
or not and on what terms the shares of the class or series will be subject
to redemption or repurchase at our
option;
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whether
the shares of the class or series of preferred stock will be listed on a
securities exchange or quoted on an inter-dealer quotation
system;
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any
limitations on direct or beneficial ownership and restrictions on transfer
applicable to the preferred stock, in addition to those already set forth
in our charter, that may be necessary to preserve our status as a real
estate investment trust; and
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the
other rights and privileges and any qualifications, limitations, or
restrictions of the rights or privileges of the class or
series.
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Transfer
Agent, Registrar, and Dividend Disbursing Agent
The
transfer agent and registrar for our preferred stock is currently Computershare
Trust Company, N.A. and its affiliate, Computershare Inc., acts as dividend
disbursing agent. If different, we will specify in the applicable prospectus
supplement the transfer agent, registrar, and dividend disbursing agent for any
series of preferred stock offered by that prospectus supplement.
-15-
DESCRIPTION
OF SECURITIES WARRANTS
We may
issue securities warrants for the purchase of common stock or preferred stock,
respectively referred to as common stock warrants and preferred stock warrants.
Securities warrants may be issued independently or together with any other
securities offered by this prospectus and any accompanying prospectus supplement
and may be attached to or separate from such other securities. Each issuance of
the securities warrants will be issued under a separate securities warrant
agreement to be entered into by us and a bank or trust company, as securities
warrant agent, all as set forth in the prospectus supplement relating to the
particular issue of offered securities warrants. Each issue of securities
warrants will be evidenced by securities warrant certificates. The securities
warrant agent will act solely as an agent of ours in connection with the
securities warrant certificates and will not assume any obligation or
relationship of agency or trust for or with any holder of securities warrant
certificates or beneficial owners of securities warrants.
If we
offer securities warrants pursuant to this prospectus in the future, the
applicable prospectus supplement will describe the terms of such securities
warrants, including the following, where applicable:
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the
offering price;
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the
aggregate number of shares purchasable upon exercise of such securities
warrants, and in the case of securities warrants for preferred stock, the
designation, aggregate number, and terms of the class or series of
preferred stock purchasable upon exercise of such securities
warrants;
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the
designation and terms of the securities with which such securities
warrants are being offered, if any, and the number of such securities
warrants being offered with each such
security;
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the
date on and after which such securities warrants and any related
securities will be transferable
separately;
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the
number of shares of preferred stock or shares of common stock purchasable
upon exercise of each of such securities warrants and the price at which
such number of shares of preferred stock or common stock may be purchased
upon such exercise;
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the
date on which the right to exercise such securities warrants shall
commence and the expiration date on which such right shall
expire;
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U.S.
federal income tax considerations;
and
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any
other material terms of such securities
warrants.
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Holders
of future securities warrants, if any, will not be entitled by virtue of being
such holders, to vote, to consent, to receive dividends, to receive notice with
respect to any meeting of stockholders for the election of our directors or any
other matter, or to exercise any rights whatsoever as stockholders of Redwood
Trust.
-16-
DESCRIPTION
OF
RIGHTS
TO PURCHASE SHARES OF COMMON OR PREFERRED STOCK
We may
issue, as a dividend at no cost, to holders of record of our securities or any
class or series thereof on the applicable record date, rights to purchase shares
of our common stock or preferred stock, to purchase warrants exercisable for
shares of our common stock or preferred stock, or to purchase units consisting
of two or more of the foregoing. In this prospectus, we refer to such rights as
“stockholder rights.” If stockholders rights are so issued to existing holders
of securities, each stockholder right will entitle the registered holder thereof
to purchase the securities issuable upon exercise of the rights pursuant to the
terms set forth in the applicable prospectus supplement.
If
stockholder rights are issued, the applicable prospectus supplement will
describe the terms of such stockholder rights including the following where
applicable:
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record
date;
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subscription
price;
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subscription
agent;
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aggregate
number of shares of preferred stock, shares of common stock, warrants, or
units purchasable upon exercise of such stockholder rights and in the case
of stockholder rights for preferred stock or warrants exercisable for
preferred stock, the designation, aggregate number, and terms of the class
or series of preferred stock purchasable upon exercise of such stockholder
rights or warrants;
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the
date on which the right to exercise such stockholder rights shall commence
and the expiration date on which such right shall
expire;
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U.S.
federal income tax considerations;
and
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other
material terms of such stockholder
rights.
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In
addition to the terms of the stockholder rights and the securities issuable upon
exercise thereof, the prospectus supplement may describe, for a holder of such
stockholder rights who validly exercises all stockholder rights issued to such
holder, how to subscribe for unsubscribed securities, issuable pursuant to
unexercised stockholder rights issued to other holders, to the extent such
stockholder rights have not been exercised.
Holders
of stockholder rights will not be entitled by virtue of being such holders to
vote, to consent, to receive dividends, to receive notice with respect to any
meeting of stockholders for the election of our directors or any other matter,
or to exercise any rights whatsoever as stockholders of Redwood Trust, except to
the extent described in the related prospectus supplement.
-17-
DESCRIPTION
OF TRUST PREFERRED SECURITIES
Redwood
Capital Trust II will only issue trust preferred securities and will not issue
debt securities, common stock, preferred stock, warrants, stockholder rights or
units. The terms of the trust preferred securities will include those stated in
the trust agreement (as it may be amended and restated from time to time) and
those made a part of that trust agreement by the Trust Indenture Act of 1939, as
amended. The statements made in this prospectus relating to the trust agreement
and the trust preferred securities are summaries of certain anticipated
provisions of the trust agreement and the trust preferred securities and are not
complete. This summary is subject to and qualified by reference to the
description of the particular terms of the trust preferred securities described
in the applicable prospectus supplement. The form of trust agreement has been
filed as an exhibit to the registration statement and you should read the form
of trust agreement for provisions that may be important to you. The actual trust
agreement and the terms of any trust preferred securities may differ materially
from the form of trust agreement. We will describe in the applicable prospectus
supplement any material differences between the actual trust agreement and trust
preferred securities and the form of trust agreement and the description of the
trust preferred securities below.
The
prospectus supplement relating to the trust preferred securities will include
specific terms relating to the offering. These terms will include some or all of
the following:
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the
designation of the trust preferred
securities;
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the
number of trust preferred securities issued by the
trust;
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the
annual distribution rate and any conditions upon which distributions are
payable, the distribution payment dates, the record dates for distribution
payments and the additional amounts, if any, that may be payable with
respect to the trust preferred
securities;
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whether
distributions will be cumulative and compounding and, if so, the dates
from which distributions will be cumulative or
compounded;
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the
amounts that will be paid out of the assets of the trust, after the
satisfaction of liabilities to creditors of the trust, to the holders of
trust preferred securities upon
dissolution;
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any
repurchase, redemption or exchange
provisions;
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any
preference or subordination rights upon a default or liquidation of the
trust;
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any
voting rights of the trust preferred securities in addition to those
required by law;
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terms
for any conversion or exchange of the debt securities or the trust
preferred securities into other
securities;
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any
rights to defer distributions on the trust preferred securities by
extending the interest payment period on the debt securities;
and
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any
other relevant terms, rights, preferences, privileges, limitations or
restrictions of the trust preferred
securities.
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The trust
preferred securities may not be convertible into other securities that have not
been registered under this registration statement unless the trust preferred
securities convertible into such other securities are not legally convertible
immediately or within one year of the date of sale of such trust preferred
securities.
Except as
otherwise set forth in the applicable prospectus supplement, the trustees, on
behalf of the trust and pursuant to the trust agreement, will issue one class of
trust preferred securities and one class of trust common securities. The trust
securities will represent undivided beneficial ownership interests in the assets
of the trust.
Except as
otherwise set forth in the applicable prospectus supplement, the trust preferred
securities will rank equally in right of payment, and payments will be made
thereon proportionately, with the trust common securities. Except as otherwise
set forth in the prospectus supplement, the property trustee of the trust will
hold legal title to the debt securities in trust for the benefit of the holders
of the trust securities. Except as otherwise set forth in the prospectus
supplement, we will execute a guarantee agreement for the benefit of the holders
of the trust preferred securities. The guarantee will guarantee the payment of
distributions (as defined below) or any amounts payable on redemption or
liquidation of the trust preferred securities when the trust does not have funds
on hand available to make such payments.
-18-
In the
prospectus supplement, we will also describe certain material U.S. federal
income tax consequences and special considerations applicable to the trust
preferred securities.
The
Trust Preferred Securities Guarantee
Except as
otherwise set forth in the prospectus supplement, we will fully and
unconditionally guarantee payments on the trust preferred securities as
described in this section. The guarantee covers the following
payments:
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periodic
cash distributions on the trust preferred securities out of funds held by
the property trustee of the trust;
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payments
on dissolution of each trust; and
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payments
on redemption of trust preferred securities of each
trust.
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Wells
Fargo Bank, N.A., as guarantee trustee, will hold the guarantee for the benefit
of the holders of trust preferred securities.
We have
summarized selected provisions of the guarantee below. This summary is not
complete. For a complete description, we encourage you to read the guarantee,
the form of which we have filed as an exhibit to the registration
statement.
Except as
otherwise set forth in the prospectus supplement, we will irrevocably and
unconditionally agree to pay holders of the trust preferred securities in full
the following amounts to the extent not paid by the trust:
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any
accumulated and unpaid distributions and any additional amounts with
respect to the trust preferred securities and any redemption price for
trust preferred securities called for redemption by the trust, if and to
the extent that we have made corresponding payments on the debt securities
to the property trustee of the trust;
and
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payments
upon the dissolution of the trust equal to the less of (i) the liquidation
amount plus all accumulated and unpaid distributions and additional
amounts on the trust preferred securities to the extent the trust has
funds legally available for those payments and (ii) the amount of assets
of the trust remaining legally available for distribution to the holders
of trust preferred securities in liquidation of the
trust.
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We will
not be required to make these liquidation payments if:
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the
trust distributes the debt securities to the holders of trust preferred
securities in exchange for their trust preferred securities;
or
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the
trust redeems the trust preferred securities in full upon the maturity or
redemption of the debt securities.
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Except as
otherwise set forth in the prospectus supplement, each guarantee is a guarantee
from the time of issuance of the trust preferred securities. EXCEPT AS OTHERWISE
SET FORTH IN THE APPLICABLE PROSPECTUS SUPPLEMENT, THE GUARANTEE ONLY COVERS
DISTRIBUTIONS AND OTHER PAYMENTS ON TRUST PREFERRED SECURITIES IF AND TO THE
EXTENT THAT WE HAVE MADE CORRESPONDING PAYMENTS ON THE DEBT SECURITIES TO THE
APPLICABLE PROPERTY TRUSTEE. EXCEPT AS OTHERWISE SET FORTH IN THE PROSPECTUS
SUPPLEMENT, IF WE DO NOT MAKE THOSE CORRESPONDING PAYMENTS ON THE DEBT
SECURITIES, THE TRUST WILL NOT HAVE FUNDS AVAILABLE FOR PAYMENTS AND WE WILL
HAVE NO OBLIGATION TO MAKE A GUARANTEE PAYMENT.
-19-
Our
obligations under the trust agreement, the guarantee, the debt securities and
the associated indenture taken together will provide a full and unconditional
guarantee of payments due on the trust preferred securities. We will describe
the specific terms of the guarantee in a prospectus supplement.
Covenants
of Redwood
Except as
otherwise set forth in the prospectus supplement, in the guarantee, we will
agree that, as long as any trust preferred securities issued by the trust are
outstanding, we will not make the payments and distributions described below
if:
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we
are in default on our guarantee payments or other payment obligations
under the guarantee;
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any
trust enforcement event under the trust agreement has occurred and is
continuing; or
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we
have elected to defer payments of interest on the related debt securities
by extending the interest payment period and that deferral period is
continuing.
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Except as
otherwise set forth in the prospectus supplement, in these circumstances, we
will agree that we will not:
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declare
or pay any dividends or distributions on, or redeem, purchase, acquire, or
make a liquidation payment with respect to, any of our capital stock,
except to the extent required in order to maintain our qualification as a
REIT; or
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make
any payment of principal, interest or premium, if any, on or repay,
repurchase or redeem any debt securities that rank equally with or junior
in right of payment to the debt securities or make any guarantee payments
with respect to any guarantee by us of the debt of any of our subsidiaries
if such guarantee ranks equally with or junior in right of payment to the
debt securities.
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However,
except as otherwise set forth in the prospectus supplement, even during such
circumstances, we may:
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purchase
or acquire our capital stock in connection with the satisfaction by us of
our obligations under any employee benefit plans or pursuant to any
contract or security outstanding on the first day of any extension period
requiring us to purchase our capital
stock;
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reclassify
our capital stock or exchange or convert one class or series of our
capital stock for another class or series of our capital
stock;
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purchase
fractional interests in shares of our capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security
being converted or exchanged;
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declare
dividends or distributions payable solely in shares of our capital
stock;
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redeem
or repurchase any rights pursuant to a rights agreement;
and
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make
payments under the guarantee related to the trust preferred
securities.
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In
addition, as long as trust preferred securities issued by any trust are
outstanding and except as otherwise set forth in the prospectus supplement, we
will agree that we will:
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remain
the sole direct or indirect owner of all the outstanding common securities
of that trust, except as permitted by the applicable trust
agreement;
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permit
the trust common securities of that trust to be transferred only as
permitted by the trust agreement;
and
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-20-
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use
reasonable efforts to cause that trust to continue to be treated as a
grantor trust for U.S. federal income tax purposes, except in connection
with a distribution of debt securities to the holders of trust preferred
securities as provided in the trust agreement, in which case the trust
would be dissolved.
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Amendments
and Assignment
Except as
otherwise set forth in the prospectus supplement, we and the guarantee trustee
may amend each guarantee without the consent of any holder of trust preferred
securities if the amendment does not adversely affect the rights of the holders
in any material respect or in order to conform the text of the guarantee to any
provision of this prospectus or the applicable prospectus supplement to the
extent such provision in this prospectus or the applicable prospectus supplement
was intended to be a verbatim recitation of the guarantee. In all other cases
and except as otherwise set forth in the prospectus supplement, we and the
guarantee trustee may amend the guarantee only with the prior approval of the
holders of at least a majority of outstanding trust preferred securities issued
by the applicable trust.
Except as
otherwise set forth in the prospectus supplement, we may assign our obligations
under the guarantee only in connection with a consolidation, merger or asset
sale involving us permitted under the indenture governing the debt
securities.
Termination
of the Guarantee
Except as
otherwise set forth in the prospectus supplement, the guarantee will terminate
upon:
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full
payment of the redemption price of all trust preferred securities of the
trust;
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distribution
of the related debt securities, or any securities into which those debt
securities are convertible, to the holders of the trust preferred
securities and trust common securities of the trust in exchange for all
the securities issued by the trust;
or
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full
payment of the amounts payable upon liquidation of the
trust.
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The
guarantee will, however, continue to be effective or will be reinstated if any
holder of trust preferred securities must repay any amounts paid on those trust
preferred securities or under the guarantee.
Status
of the Guarantee
Except as
otherwise set forth in the prospectus supplement, our obligations under the
guarantee will be unsecured and effectively junior in right of payment to all
debt and preferred stock of our subsidiaries. BY YOUR ACCEPTANCE OF THE TRUST
PREFERRED SECURITIES, YOU AGREE TO ANY SUBORDINATION PROVISIONS AND OTHER TERMS
OF THE RELATED GUARANTEE. We will specify in a prospectus supplement the ranking
of the guarantee with respect to our capital stock and other liabilities,
including other guarantees.
Except as
otherwise set forth in the prospectus supplement, the guarantee will be
deposited with the guarantee trustee to be held for your benefit. The guarantee
trustee will have the right to enforce the guarantee on your behalf. In most
cases, the holders of a majority of outstanding trust preferred securities
issued by the applicable trust will have the right to direct the time, method
and place of:
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conducting
any proceeding for any remedy available to the applicable guarantee
trustee; or
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exercising
any trust or other power conferred upon that guarantee trustee under the
applicable guarantee.
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The
guarantee will constitute a guarantee of payment and not merely of collection.
This means that the guarantee trustee may institute a legal proceeding directly
against us to enforce the payment rights under the guarantee without first
instituting a legal proceeding against any other person or
entity.
-21-
Except as
otherwise set forth in the prospectus supplement, if the guarantee trustee fails
to enforce the guarantee or we fail to make a guarantee payment, you may
institute a legal proceeding directly against us to enforce your rights under
that guarantee without first instituting a legal proceeding against the
applicable trust, the guarantee trustee or any other person or
entity.
Periodic
Reports Under Guarantee
Except as
otherwise set forth in the prospectus supplement, we will be required to provide
annually to the guarantee trustee a statement as to our performance of our
obligations and our compliance with all conditions under the
guarantees.
Duties
of Guarantee Trustee
Except as
otherwise set forth in the prospectus supplement, the guarantee trustee normally
will perform only those duties specifically set forth in the applicable
guarantee. The guarantee does not contain any implied covenants. If a default
occurs on the guarantee, the guarantee trustee will be required to use the same
degree of care and skill in the exercise of its powers under the guarantee as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs. Except as otherwise set forth in the prospectus supplement, the
guarantee trustee will exercise any of its rights or powers under the guarantee
at the request or direction of holders of the applicable series of trust
preferred securities only if it is offered security and indemnity satisfactory
to it.
Governing
Law
New York
law will govern the guarantee.
-22-
DESCRIPTION
OF UNITS
We may
issue units consisting of two or more other constituent securities. These units
may be issuable as, and for a specified period of time may be transferable only
as, a single security, rather than as the separate constituent securities
comprising such units. The statements made in this section relating to the units
are summaries only. These summaries are not complete. When we issue units, we
will provide the specific terms of the units in a prospectus supplement. To the
extent the information contained in the prospectus supplement differs from this
summary description, you should rely on the information in the prospectus
supplement.
When we
issue units, we will provide in a prospectus supplement the following terms of
the units being issued:
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the
title of any series of units;
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identification
and description of the separate constituent securities comprising the
units;
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the
price or prices at which the units will be
issued;
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the
date, if any, on and after which the constituent securities comprising the
units will be separately
transferable;
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information
with respect to any book-entry
procedures;
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a
discussion of any material or special United States federal income tax
consequences applicable to an investment in the units;
and
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any
other terms of the units and their constituent
securities.
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-23-
RESTRICTIONS
ON OWNERSHIP AND TRANSFER AND REPURCHASE OF SHARES
In order
that we may meet the requirements for qualification as a REIT at all times,
among other purposes, our charter prohibits any person from acquiring or holding
beneficial ownership of shares of our common stock or preferred stock
(collectively, “capital stock”) in excess of 9.8%, in number of shares or value,
of the outstanding shares of the related class of capital stock. For this
purpose, the term “beneficial ownership” means beneficial ownership, as
determined under Rule 13d-3 under the Exchange Act, of capital stock by a
person, either directly or constructively under the constructive ownership
provisions of Section 544 of the Internal Revenue Code of 1986, as amended (the
Code), and related provisions.
Under the
constructive ownership rules of Section 544 of the Code, a holder of a warrant
generally will be treated as owning the number of shares of capital stock into
which such warrant may be converted. In addition, the constructive ownership
rules generally attribute ownership of securities owned by a corporation,
partnership, estate, or trust proportionately to its stockholders, partners, or
beneficiaries, respectively. The rules may also attribute ownership of
securities owned by family members to other members of the same family and may
treat an option to purchase securities as actual ownership of the underlying
securities by the optionholder. The rules further provide when securities
constructively owned by a person will be considered to be actually owned for the
further application of such attribution provisions. To determine whether a
person holds or would hold capital stock in excess of the 9.8% ownership limit,
a person will be treated as owing not only shares of capital stock actually
owned, but also any shares of capital stock attributed to that person under the
attribution rules described above. Accordingly, a person who directly owns less
than 9.8% of the shares outstanding may nevertheless be in violation of the 9.8%
ownership limit.
Any
acquisition or transfer of shares of capital stock or warrants that would cause
us to be disqualified as a REIT or that would create a direct or constructive
ownership of shares of capital stock in excess of the 9.8% ownership limit, or
result in the shares of capital stock being beneficially owned, within the
meaning of Section 856(a) of the Code, by fewer than 100 persons, determined
without any reference to any rules of attribution, or result in our being
closely held within the meaning of Section 856(h) of the Code, will be null and
void, and the intended transferee will acquire no rights to those shares or
warrants. These restrictions on transferability and ownership will not apply if
our board of directors determines that it is no longer in our best interests to
continue to qualify as a REIT.
-24-
Any
purported transfer of shares of capital stock or warrants that would result in a
purported transferee owning, directly or constructively, shares in excess of the
9.8% ownership limit due to the unenforceability of the transfer restrictions
described above will constitute excess securities. Excess securities will be
transferred by operation of law to Redwood Trust as trustee for the exclusive
benefit of the person or persons to whom the excess securities are ultimately
transferred, until such time as the purported transferee retransfers the excess
securities. While the excess securities are held in trust, a holder of such
securities will not be entitled to vote or to share in any dividends or other
distributions with respect to such securities and will not be entitled to
exercise or convert such securities into shares of capital stock. Excess
securities may be transferred by the purported transferee to any person (if such
transfer would not result in excess securities) at a price not to exceed the
price paid by the purported transferee (or, if no consideration was paid by the
purported transferee, the fair market value of the excess securities on the date
of the purported transfer), at which point the excess securities will
automatically be exchanged for the stock or warrants, as the case may be, to
which the excess securities are attributable. If a purported transferee receives
a higher price for designating an ultimate transferee, such purported transferee
shall pay, or cause the ultimate transferee to pay, such excess to us. In
addition, such excess securities held in trust are subject to purchase by us at
a purchase price equal to the lesser of (a) the price per share or per warrant,
as the case may be, in the transaction that created such excess securities (or,
in the case of a devise or gift, the market price at the time of such devise or
gift), reduced by the amount of any distributions received in violation of the
charter that have not been repaid to us, and (b) the market price as reflected
in the last reported sales price of such shares of stock or warrants on the
trading day immediately preceding the date of the purchase by us as reported on
any exchange or quotation system over which such shares of stock or warrants may
be traded, or if not then traded over any exchange or quotation system, then the
market price of such shares of stock or warrants on the date of the purported
transfer as determined in good faith by our board of directors, reduced by the
amount of any distributions received in violation of the charter that have not
been repaid to us.
Upon a
purported transfer of excess securities, the purported transferee shall cease to
be entitled to distributions, voting rights, and other benefits with respect to
the shares of capital stock or warrants except the right to payment of the
purchase price for the shares of capital stock or warrants on the retransfer of
securities as provided above. Any dividend or distribution paid to a purported
transferee on excess securities prior to our discovery that shares of capital
stock have been transferred in violation of our charter shall be repaid to us
upon demand. If these transfer restrictions are determined to be void, invalid,
or unenforceable by a court of competent jurisdiction, then the purported
transferee of any excess securities may be deemed, at our option, to have acted
as an agent on our behalf in acquiring the excess securities and to hold the
excess securities on our behalf.
All
certificates representing shares of capital stock and warrants will bear a
legend referring to the restrictions described above.
Any
person who acquires shares or warrants in violation of our charter, or any
person who is a purported transferee such that excess securities result, must
immediately give written notice or, in the event of a proposed or attempted
transfer that would be void as set forth above, give at least 15 days prior
written notice to us of such event and shall provide us such other information
as we may request in order to determine the effect, if any, of the transfer on
our status as a REIT. In addition, as required under the REIT provisions of the
Code, every record owner of more than 5.0%, during any period in which the
number of record stockholders is 2,000, or 1.0%, during any period in which the
number of record stockholders is greater than 200 but less than 2,000, or 1/2%,
during any period in which the number of record stockholders is 200 or less, of
the number or value of our outstanding shares will receive a questionnaire from
us by January 30 requesting information as to how the shares are held. In
addition, our charter requires that such stockholders must provide written
notice to us by January 30 stating the name and address of the record
stockholder, the number of shares beneficially owned and a description of how
the shares are held. In practice, we have generally permitted our stockholders
to comply with the foregoing charter requirement by responding to our annual
REIT questionnaire. Further, each stockholder upon demand is required to
disclose to us in writing such information with respect to the direct and
constructive ownership of shares and warrants as our board of directors deems
reasonably necessary to comply with the REIT provisions of the Code, to comply
with the requirements of any taxing authority or governmental agency or to
determine any such compliance.
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Our board
of directors may increase or decrease the 9.8% ownership limit. In addition, to
the extent consistent with the REIT provisions of the Code, our board of
directors may, pursuant to our charter, waive the 9.8% ownership limit for a
purchaser of our stock. As a condition to such waiver the intended transferee
must give written notice to the board of directors of the proposed transfer no
later than the fifteenth day prior to any transfer which, if consummated, would
result in the intended transferee owning shares in excess of the ownership
limit. Our board of directors may also take such other action as it deems
necessary or advisable to protect our status as a REIT. Pursuant to our charter,
our board of directors has, from time to time, waived the ownership limit for
certain of our stockholders.
The
provisions described above may inhibit market activity and the resulting
opportunity for the holders of our capital stock and warrants to receive a
premium for their shares or warrants that might otherwise exist in the absence
of such provisions. Such provisions also may make us an unsuitable investment
vehicle for any person seeking to obtain ownership of more than 9.8% of the
outstanding shares of our capital stock.
CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
We have
summarized certain terms and provisions of the Maryland General Corporation Law
and our charter and bylaws. This summary is not complete and is qualified by the
provisions of our charter and bylaws, and the Maryland General Corporation Law.
See “Where You Can Find More Information.”
For
restrictions on ownership and transfer of our capital stock contained in our
charter, see “Restrictions on Ownership and Transfer and Repurchase of
Shares.”
Maryland
Business Combination Act
Under the
Maryland Business Combination Act, “business combinations” between a Maryland
corporation and an interested stockholder or an affiliate of an interested
stockholder, as such terms are defined in the Act, are prohibited for five years
after the most recent date on which the interested stockholder becomes an
interested stockholder. These business combinations include a merger,
consolidation, share exchange, or, in circumstances specified in the statute, an
asset transfer or issuance or reclassification of equity securities. The statute
permits various exemptions from its provisions, including business combinations
that are exempted by provision in the charter of the corporation. Our charter
provides that we elect not to be governed by the provisions of the Maryland
Business Combination Act.
Maryland
Control Share Acquisition Act
The
Maryland Control Share Acquisition Act causes persons who acquire beneficial
ownership of stock at levels of 10%, 33%, and more than 50% (control share
acquisitions) to lose the voting rights of such stock unless voting rights are
restored by the stockholders at a meeting by vote of two-thirds of all the votes
entitled to be cast on the matter (excluding stock held by the acquiring
stockholder or the corporation's officers or employee directors). The Maryland
Control Share Acquisition Act affords a cash-out election for stockholders other
than the acquiring stockholder, at an appraised value (but not less than the
highest price per share paid by the acquiring person in the control share
acquisition), payable by the corporation, if voting rights for more than 50% of
the outstanding stock are approved for the acquiring person. Under certain
circumstances, the corporation may redeem shares acquired in a control share
acquisition if voting rights for such shares have not been approved. The statute
does not apply (a) to shares acquired in a merger, consolidation, or share
exchange if the corporation is a party to the transaction or (b) to acquisitions
approved or exempted by the charter or bylaws of the corporation. A
corporation's board of directors has an “opt-out” power, exercisable through
amendment of the corporation's bylaws (which could be changed by the
stockholders), to exempt in advance any control share acquisition from the
Maryland Control Share Acquisition Act. Our bylaws contain a provision exempting
from the Maryland Control Share Acquisition Act acquisitions by certain persons
of shares of our common stock in accordance with waivers from the ownership
limit in our charter granted to such persons by our board of
directors.
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The
Maryland Control Share Acquisition Act could have the effect of discouraging
offers to acquire us and of increasing the difficulty of consummating any such
offers.
Classification
of Board of Directors, Vacancies, and Removal of Directors
Our
charter and bylaws provide for a board of directors with staggered terms divided
into three classes, with terms of three years each. The number of directors in
each class and the expiration of each class term, as of the date of this
prospectus, are as follows:
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Class
I
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3
Directors
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Expires
2013
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Class
II
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3
Directors
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Expires
2011
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Class
III
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3
Directors
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Expires
2012
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At each
annual meeting of our stockholders, successors of the class of directors whose
term expires at that meeting will be elected to serve for a three-year term and
until their successors are elected and qualify, and the directors in the other
two classes will continue in office. A board of directors with staggered terms
may delay, defer, or prevent a change in our control or other transaction that
might involve a premium over the then prevailing market price for our common
stock or other attributes that our stockholders may consider desirable. In
addition, a board of directors with staggered terms could prevent stockholders
who do not agree with the policies of our board of directors from replacing a
majority of the board of directors in two years.
Pursuant
to our election to be subject to certain provisions of the Maryland General
Corporation Law, any vacancy on our board of directors may be filled only by the
affirmative vote of a majority of the remaining directors in office, even if the
remaining directors do not constitute a quorum, and any director elected to fill
a vacancy shall serve for the remainder of the full term of the directorship in
which such vacancy occurred and until a successor is elected and qualifies.
Under the Maryland General Corporation Law, if the directors have been divided
into classes, unless the charter provides otherwise (which our charter does
not), a director may be removed only for cause by the affirmative vote of a
majority of all the votes entitled to be cast generally for the election of
directors.
Charter
Amendments and Extraordinary Corporate Actions
Under
Maryland law, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange, or engage in similar transactions outside the ordinary course of
business, unless approved by the affirmative vote of stockholders entitled to
cast at least two-thirds of the votes entitled to be cast on the matter.
However, a Maryland corporation may provide in its charter for approval of these
matters by a lesser percentage, but not less than a majority of all of the votes
entitled to be cast on the matter. Our charter provides for approval of these
matters by the affirmative vote of the holders of a majority of the total number
of shares entitled to vote on the matter.
Advance
Notice of Director Nominations and New Business
Our
bylaws provide that with respect to an annual meeting of stockholders,
nominations of individuals for election to the board of directors and the
proposal of business to be considered by stockholders may be made only (i)
pursuant to our notice of the meeting, (ii) by the board of directors or (iii)
by a stockholder who is entitled to vote at the meeting and who has complied
with the advance notice procedures of our bylaws. With respect to special
meetings of stockholders, only the business specified in our notice of the
meeting may be brought before the meeting.
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MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following is a general summary of the material U.S. federal income tax
considerations relevant to our status as a REIT and to your investment in our
common stock.
This
discussion does not address all aspects of U.S. federal income taxation that may
be relevant to a particular stockholder in light of his or her personal
investment circumstances or to certain types of investors subject to special tax
rules (including financial institutions, insurance companies, broker-dealers
and, except to the limited extent discussed below, tax-exempt entities and
foreign taxpayers) and it does not discuss any aspects of state, local, or
foreign country tax law. This discussion assumes that you hold your common stock
as a “capital asset” (generally, property held for investment) under the
Internal Revenue Code. This summary is for general information only and is not
tax advice.
The
information in this summary is based upon current law, including the Internal
Revenue Code, existing Treasury Department regulations, revenue rulings, revenue
procedures, proposed regulations and case law, all of which are subject to
change both prospectively or retroactively. Moreover, relevant laws or other
legal authorities may change in a manner that could adversely affect the tax
considerations contained in this discussion. This summary does not discuss any
state, local, or foreign tax consequences associated with our election to be
taxed as a REIT.
You
are urged to consult your tax advisors regarding the specific tax consequences
to you of:
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the
acquisition, ownership, and/or sale or other disposition of our common
stock, including the federal, state, local, foreign, and other tax
consequences; and
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potential
changes in the applicable tax laws and regulations described
below.
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Taxation
of Redwood Trust
We have
elected to be taxed as a REIT under the Internal Revenue Code, commencing with
our taxable year ended December 31, 1994. We believe that we have been organized
and have operated in a manner that has allowed us to qualify for taxation as a
REIT under the Internal Revenue Code commencing with our taxable year ended
December 31, 1994, and we intend to continue to be organized and operate in this
manner.
In
reading the discussion set forth below, it should be noted that although Redwood
is combined with all of its subsidiaries for financial accounting purposes, for
U.S. federal income tax purposes only Redwood and those subsidiaries designated
as qualified REIT subsidiaries (and their assets and income) constitute the REIT
(see “—Qualified REIT subsidiaries” below) and references in this section to
“we,” “us,” or “our,” unless otherwise indicated, refer only to such entities.
Redwood’s remaining domestic corporate subsidiaries constitute taxable entities
subject to regular corporate income taxes, while Redwood’s non-corporate
subsidiaries and foreign taxable REIT subsidiaries are generally not subject to
U.S. corporate income taxes (see “—Taxable REIT subsidiaries”
below).
In
connection with the filing of our registration statement of which this
prospectus is a part, our tax counsel, Chapman and Cutler LLP, has rendered an
opinion to the effect that (i) we have been organized and operated in conformity
with the requirements for qualification as a REIT under the Code commencing with
our taxable year ended December 31, 1994 and continuing through the fiscal
quarter ended June 30, 2010 (the date of our most recent interim financial
statements and REIT compliance reports) and (ii) our current and proposed
methods of operation in periods subsequent to such date will enable us to
continue to qualify as a REIT under the Code. It must be emphasized that the
opinion of Chapman and Cutler LLP is based on various assumptions relating to
our organization and operation, including that all factual representations and
statements set forth in documents, records, and instruments provided to them are
true and correct, all actions described in this prospectus supplement and the
accompanying prospectus are completed in a timely fashion and that we will at
all times operate in accordance with the methods of operation described in our
organizational documents and this prospectus supplement and accompanying
prospectus, and is conditioned upon factual representations and covenants made
by our officers, regarding our organization, assets, income, distributions,
stock ownership, the present and future conduct of our business operations, the
fair market value of our investments and other items regarding our ability to
meet the various requirements for qualification as a REIT, and assumes that such
representations and covenants are accurate and complete and that we will take no
action inconsistent with our qualification as a REIT. While we believe that we
are organized and operated so that we qualify as a REIT, given the highly
complex nature of the rules governing REITs, the fact that certain aspects of
our operations have not been considered by the courts or the Internal Revenue
Service (IRS) in connection with determining compliance with the requirements
for REIT status, the ongoing importance of factual determinations and the
possibility of future changes in our circumstances or applicable law, no
assurance can be given by Chapman and Cutler LLP or us that we so qualify for
any particular year. Chapman and Cutler LLP will have no obligation to advise us
or the holders of our common stock of any subsequent change in the matters
stated, represented or assumed or of any subsequent change in the applicable
law. You should be aware that opinions of counsel are not binding on the IRS,
and no assurance can be given that the IRS will not challenge the conclusions
set forth in such opinions.
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In any
year in which we qualify as a REIT, we generally are not subject to U.S. federal
income tax on that portion of our taxable income that is distributed to our
stockholders. We are, however, subject to U.S. federal income tax at normal
corporate income tax rates upon any undistributed taxable income or capital
gain.
In
addition, notwithstanding our qualification as a REIT, we may also be subject to
tax in certain other circumstances. As discussed below, if we fail to satisfy
the REIT Gross Income Tests, as described below, but nonetheless maintain our
qualification as a REIT because certain other requirements are met, we will
generally be subject to a 100% tax on an amount equal to (a) the greater of (1)
the amount by which we fail the 75% Gross Income Test or (2) the amount by which
we fail the 95% Gross Income Test, multiplied by (2) a fraction intended to
reflect our profitability. If we fail to satisfy any of the REIT Asset Tests, as
described below, other than a failure of the 5% or 10% REIT Asset Tests that do
not exceed a statutory de minimis amount as more fully described below, but our
failure is due to reasonable cause and not willful neglect, and we nonetheless
maintain our REIT status because of specified cure provisions, we will be
required to pay a tax equal to the greater of $50,000 or the highest corporate
rate (currently 35%) of the net income generated by the nonqualifying assets
during the period in which we failed to satisfy the REIT Asset
Tests.
We will
also be subject to a tax of 100% on net income we derive from any “prohibited
transaction,” which refers to dispositions of property held by the REIT
classified as “property held for sale to customers in the ordinary course of
business” of the REIT (i.e., “dealer” property). We do not believe that we have
or will engage in transactions that would result in the us being classified as a
dealer or deemed to have disposed of dealer property. However, whether property
is held as dealer property or “primarily for sale to customers in the ordinary
course of a trade or business” will depend on particular facts and circumstances
and no assurance can be given that the IRS will agree with our determinations as
to whether assets constitute dealer property.
If we
have (i) net income from the sale or other disposition of “foreclosure property”
which is held primarily for sale to customers in the ordinary course of business
or (ii) other non-qualifying income from foreclosure property, we will be
subject to U.S. federal income tax on such income at the highest corporate
income tax rate. In addition, a nondeductible excise tax, equal to 4% of the
excess of required distributions over the amounts actually distributed, will be
imposed on us for each calendar year to the extent that dividends paid during
the year, or declared during the last quarter of the year and paid during
January of the succeeding year, are less than the sum of (1) 85% of our REIT
“ordinary income,” plus (2) 95% of our REIT capital gain net income, plus (3)
any undistributed income remaining from earlier years. We may also be subject to
the corporate alternative minimum tax, as well as other taxes in certain
situations not presently contemplated.
We will
generally be subject to tax on the portion of any “excess inclusion income”
derived by us from a residual interest in a real estate mortgage investment
conduit (REMIC) or taxable mortgage pool to the extent our stock is held in
record name by specified tax-exempt organizations not subject to tax on
unrelated business taxable income. We do not currently expect to hold such
assets.
We may
also voluntarily revoke our election to be taxed as a REIT, although we have no
intention of doing so, in which event we will be prohibited from electing REIT
status for the year to which the revocation relates and the following four tax
years.
If we
failed to qualify as a REIT in any particular year, we would be subject to U.S.
federal income tax as a regular, domestic corporation, and our stockholders
would be subject to tax in the same manner as stockholders of a regular
corporation. In such event, we could be subject to potentially substantial
income tax liability in respect of each tax year that we fail to qualify as a
REIT as well as the four tax years following the year of the failure and, as a
result, the amount of earnings and cash available for distribution to our
stockholders could be significantly reduced.
-29-
We intend
to monitor on an ongoing basis our compliance with the requirements for
qualifying as a REIT. In order to maintain our REIT status, we may be required
to limit the types of assets that we might otherwise acquire, or hold certain
assets at times when we might otherwise have determined that the sale or other
disposition of such assets would have been more prudent.
REIT
Qualification
The
following is a brief summary of certain technical requirements that we must meet
on an ongoing basis in order to qualify, and remain qualified, as a REIT under
the Internal Revenue Code.
Stock
Ownership Tests
Our
capital stock must be held by at least 100 persons for at least 335 days of a
twelve-month year, or a proportionate part of a short tax year. In addition, no
more than 50% of the value of our capital stock may be owned, directly or
indirectly, by five or fewer individuals at any time during the last half of the
tax year. Under the Internal Revenue Code, most tax-exempt entities, including
employee benefit trusts and charitable trusts (but excluding trusts described in
Section 401(a) and exempt under Section 501(a) of the Internal Revenue Code),
are generally treated as individuals for these purposes. We must satisfy these
stock ownership requirements each tax year. We must solicit information from
certain of our stockholders to verify ownership levels and must maintain records
regarding those who do not respond. Our charter imposes certain repurchase
obligations and restrictions regarding the transfer of our shares in order to
aid in meeting the stock ownership requirements. If we were to fail either of
the stock ownership tests, we would generally be disqualified from REIT status,
unless, in the case of the “five or fewer” requirement, a statutory “good faith”
exemption is available.
Asset
Tests
We must
generally meet the following asset tests (the REIT Asset Tests) at the close of
each quarter of each tax year:
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·
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at
least 75% of the value of our total assets, as determined in accordance
with generally accepted accounting principles, must consist of qualified
real estate assets, government securities, cash, and cash items (the 75%
Asset Test);
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·
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the
value of our assets consisting of securities (other than those includible
under the 75% Asset Test) must not exceed 25% of the total value of the
REIT's assets;
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·
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the
value of our assets consisting of securities of one or more taxable REIT
subsidiaries must not exceed 25% (20% with respect to our taxable years
beginning before January 1, 2009) of the value of the REIT's total assets;
and
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·
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the
value of securities held by us, other than securities of a taxable REIT
subsidiary or securities taken into account for purposes of the 75% Asset
Test, must not exceed (i) 5% of the value of our total assets in the case
of securities of any one non-government issuer, and (ii) 10% of the
outstanding vote or value of any such issuer's
securities.
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For
purposes of the above tests, qualified real estate assets generally include
interests in real property, such as land, buildings, leasehold interests in real
property, stock of other corporations that qualify as REITs, mortgage loans, and
certain mortgage backed securities. The term “value” generally means, with
respect to securities for which market quotations are readily available, the
market value of such securities, and with respect to other securities and
assets, fair value as determined by us in good faith.
In
applying the above tests, we are generally required to re-value all of our
assets at the end of any quarter in which we acquire a substantial amount of new
securities or other property other than qualified real estate assets. We intend
to closely monitor the purchase, holding, and disposition of our assets in order
to comply with the REIT Asset Tests. We expect that substantially all of our
assets, other than our interests in our taxable REIT subsidiaries, will be
qualified real estate assets and intend to limit, or hold through taxable REIT
subsidiaries, any assets not qualifying as qualified real estate assets so as to
comply with the above REIT Asset Tests. If it is anticipated that the above
limits would be exceeded, we intend to take appropriate measures to avoid
exceeding such limits, including the disposition of non-qualifying assets within
the permitted time periods for cure.
-30-
Due to
the fact that our assets are not subject to precise determination or valuation,
no assurance can be given that we have satisfied or will be able to continue to
satisfy the REIT asset tests at all times. If we discover that we failed one or
more of the REIT Asset Tests, we may nonetheless avoid losing our REIT status if
we satisfy either (i) a de minimis exception or (ii) certain reasonable cause
and disclosure requirements and pay certain penalties. The de minimis exception
applies only to the last REIT Asset Test described above and is limited to
violations not exceeding the lesser of 1% of our total assets at the end of such
quarter or $10 million. The reasonable cause exception requires that we make
certain disclosures to the IRS, establish that the failure was due to reasonable
cause and not willful neglect, and pay a penalty equal to the greater of $50,000
or an amount equal to tax at the highest corporate tax rate on the income
derived from such non-qualifying assets during period from identification to
cure. Both exceptions also require that we dispose of the related assets within
six months after the last day of the quarter in which we identify the failure or
that we otherwise cure the failure within the same time period by, for instance,
increasing our percentage ownership of other qualified assets. In the event
these relief provisions were not applicable to a particular set of circumstances
involving an asset test failure, we could fail to qualify as a REIT. See
“Failure to qualify” below.
Gross
Income Tests
We must
generally meet the following gross income tests (the REIT Gross Income Tests)
for each tax year:
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at
least 75% of our gross income, excluding gross income from prohibited
transactions, if any, must be derived from certain specified real estate
sources, including interest income on mortgages secured by real property
or interests therein and gain from the disposition of qualified real
estate assets, foreclosure property or “qualified temporary investment
income” (i.e., income derived from “new capital” within one year of the
receipt of such capital) (the 75% Gross Income Test);
and
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at
least 95% of the REIT's gross income for each tax year must be derived
from sources of income qualifying for the 75% Gross Income Test, or from
dividends, interest, and gains from the sale of stock or other securities
not held for sale in the ordinary course of business (the 95% Gross Income
Test).
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We intend
to maintain our REIT status by carefully monitoring our income, including income
from hedging transactions and sales of mortgage assets, to comply with the REIT
Gross Income Tests. In computing compliance with the Gross Income Tests, we must
evaluate whether and how income generated by interest rate caps and other
hedging instruments undertaken by us fit within these tests. Generally speaking,
to the extent an interest rate cap or other hedging instrument was acquired to
reduce the interest rate risks with respect to any indebtedness incurred or to
be incurred by the REIT to acquire or carry real estate assets and was properly
identified at inception (“qualified hedging income”), we can exclude such income
for purposes of computing compliance with the 95% Gross Income Test. Recent
legislation expanded this exclusion so that it also applies for purposes of the
75% Gross Income Test and expanded the definition of qualified hedging income to
also include income from transactions entered into after July 30, 2008 primarily
to manage the risk of currency fluctuations with respect to any item of income
or gain that would constitute qualifying income under the 75% and 95% Gross
Income Tests.
It should
be noted that under certain circumstances, for example, (i) the sale of a
substantial amount of assets to repay borrowings in the event that other credit
is unavailable or (ii) an unanticipated decrease in qualifying income which
results in our non-qualifying income exceeding 5% of our gross income, we may be
unable to comply with certain of the REIT Gross Income Tests. Inadvertent
failures to comply with the REIT Gross Income Tests will not result in
disqualification of the REIT if certain disclosure and reasonable cause criteria
are met and a 100% tax on the amount equal to the qualified income shortfall
multiplied by a fraction intended to reflect our profitability is paid. See
“—Taxation of Redwood Trust” above for a discussion of the tax consequences of
failure to comply with the REIT Gross Income Tests. It is not possible to state
whether we would be entitled to the benefit of these relief provisions in all
circumstances. If these relief provisions were not applicable to a particular
set of circumstances involving a failure to satisfy the Gross Income Tests, we
could fail to qualify as a REIT. See “Failure to qualify”
below.
-31-
Distribution
Requirements
We
generally are required to distribute to our stockholders an amount equal to at
least 90% of our REIT taxable income determined before applying the deduction
for dividends paid and by excluding net capital gains. Such distributions must
be made in the tax year to which they relate or, if declared before the timely
filing of our tax return for such year and paid not later than the first regular
dividend payment after such declaration, in the following tax year.
The IRS
has ruled generally that if a REIT's dividend reinvestment plan allows
stockholders of the REIT to elect to have cash distributions reinvested in
shares of the REIT at a purchase price equal to at least 95% of the fair market
value of such shares on the distribution date, then such distributions generally
qualify towards this distribution requirement. We maintain a Direct Stock
Purchase and Dividend Reinvestment Plan (DSPP) and intend that the terms of our
DSPP will comply with the IRS public rulings regarding such plans.
If we
earn material amounts of non-cash income, it might be necessary, in order to
meet the distribution requirements, to arrange for short-term, or possibly
long-term, borrowings or to pay dividends in the form of taxable in-kind
distributions of property, including taxable stock dividends. In the case of a
taxable stock dividend, stockholders would be required to include the dividend
as income and would be required to satisfy the tax liability associated with the
distribution with cash from other sources including sales of our common stock.
Both a taxable stock distribution and sale of common stock resulting from such
distribution could adversely affect the price of our common stock.
If we
fail to meet the distribution test as a result of a retroactive adjustment to
our REIT taxable income, we may be able to avoid disqualification as a REIT by
paying a “deficiency” dividend within a specified time period and in accordance
with other requirements set forth in the Code. We would be liable for interest
based on the amount of the deficiency dividend. A deficiency dividend is not
permitted if the deficiency is due to fraud with intent to evade tax or to a
willful failure to file a timely tax return.
Qualified
REIT Subsidiaries
A
qualified REIT subsidiary is any corporation in which a REIT owns 100% of the
stock issued by such corporation and for which no election has been made to
classify it as a taxable REIT subsidiary. From time
to time, we form wholly-owned subsidiaries that are treated as qualified REIT
subsidiaries, including, but not limited to Sequoia
Mortgage Funding Corporation. As such, their assets, liabilities, and income are
generally treated as assets, liabilities, and income of the REIT for purposes of
each of the above REIT qualification tests.
In
addition, if we hold an equity interest in an entity that is classified as a
partnership or disregarded entity under the Internal Revenue Code, such as
Redwood Opportunity Fund, L.P. or its general partner, RWT LLC, for U.S. federal
income tax purposes the REIT will generally be treated as earning directly its
allocable share of the income and losses of such entity and owning its allocable
share of the assets of the entity. Such income and assets generally have the
same tax character as in the hands of the partnership. However, legislation has
been proposed that, if enacted, would characterize taxable income earned in the
form of a carried interest in an investment fund as compensation for services.
If this legislation is enacted and does not contain a carve out for carried
interests earned by REITs, certain of the income that we earn from the
investment funds we sponsor may have a character different than that in the
hands of the actual investment fund and may not qualify as good income under the
REIT income tests.
Taxable
REIT Subsidiaries
A taxable
REIT subsidiary is any corporation in which a REIT owns stock (directly or
indirectly) and for which the REIT and such corporation make a joint election to
classify the corporation as a taxable REIT subsidiary. Effective January 1,
2001, RWT Holdings, Inc. (“Holdings”), and Redwood Trust elected to treat
Holdings, Sequoia Residential Funding, and Holdings’ other subsidiaries as
taxable REIT subsidiaries of Redwood. Since 2001, Redwood Trust has
made taxable REIT subsidiary elections together with various other subsidiaries,
including but not limited to, Redwood Asset Management, Inc., Redwood Mortgage
Funding, Inc., the Acacia entities and certain other entities in which it has
made minority equity investments. As taxable REIT subsidiaries, these
subsidiaries are not subject to the REIT asset, income, and distribution
requirements nor are their assets, liabilities, or income treated as assets,
liabilities, or income of the REIT for purposes of each of the above REIT
qualification tests.
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We
generally engage in securitization transactions (other than certain non-REMIC,
debt-for-tax securitizations) through our taxable REIT subsidiaries. In
addition, we generally intend to make a taxable REIT subsidiary election with
respect to any other corporation in which we acquire equity or equity-like
securities constituting more than 10% by vote or value of such corporation's
equity and that is not otherwise a qualified REIT subsidiary. However, the
aggregate value of all of our taxable REIT subsidiaries must be limited to 25%
(20% with respect to our taxable years beginning prior to January 1, 2009) of
the total value of our assets. In addition, we will be subject to a 100% penalty
tax on any rent, interest, or other charges that we impose on any taxable REIT
subsidiary in excess of an arm's -length price for comparable services. We
expect that any rents, interest, or other charges imposed on Holdings or any
other taxable REIT subsidiary will be at arm's-length prices.
We
generally expect to derive income from our taxable REIT subsidiaries by way of
distributions of the earnings of such taxable REIT subsidiaries. To the extent
such distributions constitute dividend income, such income is not real estate
source income for purposes of the 75% Gross Income Test. Therefore, when
aggregated with our other non-real estate source income, such income (together
with any other income we have earned that is not qualifying income for the 75%
Gross Income Test) must be limited to 25% of our gross income each year. We will
monitor the value of our investment in, and the distributions from, our taxable
REIT subsidiaries for purposes of compliance with all applicable REIT income and
asset tests.
Taxable
REIT subsidiaries doing business in the United States are generally subject to
corporate level tax on their net income and generally will be able to distribute
only net after-tax earnings to their stockholders, including Redwood, as
dividend distributions. The Acacia entities are considered foreign subsidiaries
not engaged in trade or business in the United States for tax purposes and
therefore are not subject to U.S. corporate income taxation. However, the Acacia
entities are characterized as controlled foreign corporations (CFCs) under the
Internal Revenue Code and therefore we are required to recognize income equal to
the net income derived from our investment in these entities without regard to
whether distributions are made to us. Income that we earn from the Acacia CFCs
is generally taxed as ordinary income and any losses that we might recognize on
our equity investments in the CFCs will generally be treated as capital losses.
Certain of the offshore investment fund entities that we sponsor have made
elections to be classified as corporations for U.S. federal income tax purposes.
Those entities are classified as passive foreign investment companies (PFICs)
and to the extent that we make equity investments directly in such PFICs, we
typically make an election so that our investment is taxed similar to that
described above for CFCs.
There can
be no assurance that the IRS will not assert that the Acacia entities or other
offshore entities that we sponsor are doing business in the United States, which
position, if sustained, would subject the such entities to corporate level tax
on their effectively connected U.S. trade or business income. If this were to
occur, then our investments in such offshore entities would generally only be
able to contribute net after-tax earnings to our dividend
distributions.
In
addition, it should be noted that we have treated and intend to continue to
treat income inclusions from our CFC and PFIC investments as qualifying income
for purposes of the 95% Gross Income Test but not the 75% Gross Income Test.
Income inclusions from equity investments in CFCs and PFICs are not specifically
enumerated as includible for purposes of the 95% Gross Income Test, and there is
no clear precedent with respect to the treatment of such income for the 95%
Gross Income Test. However, such income inclusions have been treated as dividend
income for other tax purposes and based on advice of counsel, we have treated
and intend to continue treat such income inclusions as qualifying income for
purposes of the 95% Gross Income Test. Nevertheless, because such income is not
specifically addressed by the REIT provisions, it is possible that the IRS could
successfully take the position that such income is not qualifying income for
this purpose. In the event that such income was determined not to qualify for
the 95% Gross Income Test, we would be subject to a penalty tax with respect to
such income to the extent it and our other nonqualifying income exceeds 5% of
our gross income and/or we could fail to qualify as a REIT. See “REIT
Qualification” above and “Failure to Qualify” below. Such penalty tax, if
applicable, would be equal to the amount by which we were determined to fail the
95% Gross Income Test multiplied by a fraction intended to reflect our
profitability.
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Failure
to Qualify
In
addition to those provisions already described, we can also cure REIT
qualification failures if we establish that such failure was due to reasonable
cause and not willful neglect and we pay a penalty of $50,000 for each such
failure. However, if we fail any of the REIT qualification tests described
previously in any tax year and the cure provisions provided by the Internal
Revenue Code do not apply, we would be subject to U.S. federal income tax
(including any applicable alternative minimum tax) on our taxable income at the
regular U.S. federal corporate income tax rates. Distributions to stockholders
in any year in which we fail to qualify as a REIT would not be deductible by us,
nor would distributions generally be required to be made under the Internal
Revenue Code. Further, unless entitled to relief under certain other provisions
of the Internal Revenue Code, we would also be disqualified from re-electing
REIT status for the four tax years following the year in which we became
disqualified.
Tax
Treatment Generally of U.S. Persons Investing in Our Common Stock
The
discussion under this heading only applies to stockholders that are “U.S.
persons.” A U.S. person is a person who is:
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A
citizen or resident of the United
States;
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A
corporation or other entity treated as a corporation for U.S. federal
income tax purposes, created or organized in the United States or under
the laws of the United States or any political subdivision
thereof;
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An
estate whose income is includible in gross income for U.S. federal income
tax purposes regardless of its source;
or
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A
trust, if (1) a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have authority to control all substantial decisions of the trust,
or (2) the trust was in existence on August 26, 1996, was treated as a
domestic trust before such date, and has made an election to continue to
be treated as a U.S. person.
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If an
entity or arrangement treated as a partnership for U.S. federal income tax
purposes holds our stock, the U.S. federal income tax treatment of a partner
will generally depend on the status of the partner and the activities of the
partnership. A partner of a partnership holding our common stock should consult
its tax advisor regarding the federal income tax consequences to the partner of
the acquisition, ownership and disposition of our stock by the
partnership.
Unless
you are a tax-exempt entity, for any tax year in which we are treated as a REIT
for U.S. federal income tax purposes, distributions (including constructive or
in-kind distributions) made to you (and not designated as capital gain
dividends) will generally be subject to tax as ordinary income to the extent of
our current and accumulated earnings and profits as determined for U.S. federal
income tax purposes. If the amount distributed exceeds your allocable share of
such earnings and profits, the excess will be treated as a return of capital to
the extent of your tax basis in the common stock, which will not be subject to
tax, and thereafter as a taxable gain from the sale or exchange of a capital
asset.
Distributions
designated by us as capital gain dividends will generally be subject to tax as
long-term capital gain to you, to the extent that the distribution does not
exceed our actual net capital gain for the tax year. Alternatively, we can also
elect by written notice to our stockholders to designate a portion of our net
capital gain income as being retained and pay directly the tax on such net
capital gains. In that instance, generally if you are required to include the
deemed capital gains dividend in income, you will be entitled to claim a credit
or refund on your tax return for the tax paid by us with respect to such deemed
dividend, and you will be entitled to increase your tax basis in our shares by
an amount equal to the excess of the deemed capital gain dividend over the tax
you are deemed to have paid.
Distributions
by us, whether characterized as ordinary income or as capital gain, are not
eligible for the corporate dividends received deduction that exists under
current law. Furthermore, distributions by us characterized as ordinary income
generally will not be subject to the reduced 15% and 5% tax rates otherwise
effective for certain types of dividends as of January 1, 2003. However,
dividend distributions by us characterized as capital gain distributions will be
subject to the reduced 5% and 15% tax rates effective through
2010.
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In the
event that we realize a loss for a tax year, you will not be permitted to deduct
any share of that loss. Further, if we (or a portion of our assets) were to be
treated as a taxable mortgage pool, or if we were to hold residual interests in
REMICs, any “excess inclusion” income derived therefrom and allocated to you
would not be allowed to be offset by any net operating losses.
Dividends
declared during the last quarter of a tax year and actually paid during January
of the following tax year are generally treated as if received on December 31 of
the tax year in which they are declared and not on the date actually received.
In addition, we may elect to treat certain other dividends distributed after the
close of the tax year as having been paid during such tax year, but you will be
treated as having received such dividend in the tax year in which the
distribution is made.
Upon a
sale or other disposition of our common stock, you would generally recognize a
capital gain or loss in an amount equal to the difference between the amount
realized and your tax basis in such stock, which gain or loss generally will be
long-term if the stock was held for more than twelve months. Any loss on the
sale or exchange of common stock held by you for six months or less will
generally be treated as a long-term capital loss to the extent of any designated
capital gain dividends received by you. If common stock is sold after a record
date but before a payment date for declared dividends on such stock, you will
nonetheless be required to include such dividend in income in accordance with
the rules above for distributions, whether or not such dividend is required to
be paid over to the purchaser.
We are
required under Treasury Department regulations to demand annual written
statements from the record holders of designated percentages of our stock
disclosing the actual and constructive ownership of such stock and to maintain
permanent records showing the information we have received as to the actual and
constructive ownership of such stock and a list of those persons failing or
refusing to comply with such demand.
In any
year in which we do not qualify as a REIT, distributions made to you would be
taxable in the same manner discussed above, except that no distributions could
be designated as capital gain dividends, distributions would be eligible for the
corporate dividends received deduction and may be eligible for the reduced tax
rates on dividends (if paid out of previously-taxed earnings), the excess
inclusion income rules would not apply, and you would not receive any share of
our tax preference items. In such event, however, we would be subject to
potentially substantial U.S. federal income tax liability, and the amount of
earnings and cash available for distribution to you could be significantly
reduced or eliminated.
Information
Reporting and Backup Withholding with Respect to Our Common Stock
We will
report to our U.S. stockholders and the IRS the amount of distributions paid or
deemed paid during each calendar year, and the amount of tax withheld, if any.
Under the backup withholding rules, a stockholder may be subject to backup
withholding with respect to distributions paid (at the rate generally equal to
the fourth lowest rate of U.S. federal income tax then in effect (currently
28%)) unless such holder (a) is a corporation or comes within certain other
exempt categories and, when required, demonstrates that fact; or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A stockholder that does not provide us with its correct
taxpayer identification number may also be subject to penalties imposed by the
IRS. Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, we may be required to withhold
a portion of dividends and capital gain distributions to any stockholders that
do not certify under penalties of perjury their non-foreign status to
us.
Tax
Treatment Generally of Tax-Exempt Entities Investing in Our Common
Stock
The
discussion under this heading only applies to you if you are a tax-exempt
entity. Subject to the discussion below regarding a “pension-held REIT,” a
tax-exempt stockholder is generally not subject to tax on distributions from us
or gain realized on the sale of the common stock or preferred stock, provided
that:
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you
do not incur indebtedness to purchase or hold our common
stock;
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your
shares are not otherwise used in an unrelated trade or business;
and
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we
do not distribute dividends to you that are treated as “excess inclusion”
income as defined under the
Code.
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It should
be emphasized that if we were to hold a residual interest in a REMIC, or if a
pool of the REIT's assets were to be treated as a “taxable mortgage pool,” a
portion of the dividends paid to a tax-exempt stockholder may be subject to tax
as “unrelated business taxable income,” or UBTI. Although we do not intend to
acquire such residual interests at the REIT level or believe that we, or any
portion of our assets, will be treated as a taxable mortgage pool, no assurance
can be given that the IRS might not successfully maintain that such a taxable
mortgage pool exists.
If a
qualified pension trust (i.e., any pension or other retirement trust that
qualifies under Section 401(a) of the Code) holds more than 10% by value of the
interests in a “pension-held REIT” at any time during a tax year, a substantial
portion of the dividends paid to the qualified pension trust by such REIT may
constitute UBTI. For these purposes, a “pension-held REIT” is a REIT (i) that
would not have qualified as a REIT but for the provisions of the Internal
Revenue Code which look through qualified pension trust stockholders in
determining ownership of stock of the REIT and (ii) in which at least one
qualified pension trust holds more than 25% by value of the equity interest of
such REIT or one or more qualified pension trusts (each owning more than a 10%
interest by value in the REIT) hold in the aggregate more than 50% by value of
the equity interests in such REIT. Assuming compliance with the ownership limit
provisions in our charter, it is unlikely that pension plans will accumulate
sufficient stock to cause us to be treated as a pension-held REIT.
Distributions
to certain types of tax-exempt stockholders exempt from U.S. federal income
taxation under Sections 501 (c)(7), (c)(9), (c)(17), and (c)(20) of the Internal
Revenue Code may also constitute UBTI, and such prospective investors should
consult their tax advisors concerning the applicable “set aside” and reserve
requirements.
U.S.
Tax Treatment Generally of Foreign Persons Investing in Our Common
Stock
The
discussion under this heading only applies to you if you are not a “U.S. person”
as defined above under “Tax treatment generally of U.S. persons investing in our
common stock” (hereinafter, a “foreign stockholder”).
This
discussion provides only a brief summary of certain U.S. federal tax
consequences that apply to you, but does not consider any specific facts or
circumstances that may apply to you and your particular situation. Therefore, we
urge you to consult your tax advisor regarding the U.S. federal income tax
consequences of acquiring, holding, and disposing of our stock, or any tax
consequences that may arise under the laws of any foreign, state, local, or
other taxing jurisdiction.
Distributions
paid by us out of our earnings and profits, as determined for U.S. federal
income tax purposes, to a foreign stockholder will generally be subject to
withholding of U.S. federal income tax at the rate of 30%, unless reduced or
eliminated by an applicable tax treaty or unless such dividends are treated as
effectively connected with a U.S. trade or business. In the case of a taxable
stock dividend with respect to which any withholding tax is imposed, we may have
to withhold or dispose of part of the shares otherwise distributable in such
dividend and use shares or the proceeds of such disposition to satisfy the
withholding tax imposed. Distributions paid by us in excess of our earnings and
profits will be treated as a tax-free return of capital to the extent of the
holder's adjusted basis in his shares of stock, and thereafter as gain from the
sale or exchange of a capital asset as described below. If it cannot be
determined at the time a distribution is made whether such distribution will
exceed our earnings and profits, the distribution will be subject to withholding
at the same rate as dividends. Amounts so withheld, however, will be refundable
or creditable against the foreign stockholder's U.S. federal tax liability if it
is subsequently determined that such distribution was, in fact, in excess of our
earnings and profits. If the receipt of the dividend is treated as being
effectively connected with the conduct of a trade or business within the United
States by a foreign stockholder, the dividend received by such holder will be
subject to the U.S. federal income tax on net income that applies to United
States persons generally (and, with respect to corporate holders and under
certain circumstances, to the branch profits tax).
Certain
capital gains distributions by a REIT to a foreign stockholder that are
attributable to gain from the sales or exchanges by us of “United States real
property interests” will be treated as if such gain were effectively connected
with a U.S. business and will thus be subject to tax at the normal capital gain
rates applicable to U.S. stockholders (subject to applicable alternative minimum
tax) under the provisions of the Foreign Investment in Real Property Tax Act of
1980 (FIRPTA). Also, distributions subject to FIRPTA may be subject to a 30%
branch profits tax in the hands of a foreign corporate stockholder not entitled
to a treaty exemption. We are required to withhold 35% of any distribution that
could be designated by us as a capital gains dividend. This amount may be
credited against the foreign stockholder's FIRPTA tax liability. FIRPTA does not
apply, however, to REIT capital gain distributions (so long as they are made
with respect to a class of REIT stock that is regularly traded on an established
securities market in the United States) to a foreign investor that does not own
more than 5% of the REIT's stock any time during the one year period ending on
the date of such distribution. Such distributions are instead treated by the
investor as a regular, rather than capital gain, dividends. It should also be
noted that mortgage loans without substantial equity or with shared appreciation
features generally would not be classified as “United States real property
interests.”
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A foreign
stockholder will generally not be subject to U.S. federal income tax on gain
recognized on a sale or other disposition of its shares of either common or
preferred stock unless (i) the gain is effectively connected with the conduct of
a trade or business within the United States by the foreign stockholder, (ii) in
the case of a foreign stockholder who is a nonresident alien individual and
holds such shares as a capital asset, such holder is present in the United
States for 183 or more days in the tax year and certain other requirements are
met, or (iii) the foreign stockholder is subject to tax under the FIRPTA rules
because we are not domestically controlled. Gain that is effectively connected
with the conduct of a business in the United States by a foreign stockholder
will be subject to the U.S. federal income tax on net income that applies to
U.S. persons generally (and, with respect to corporate holders and under certain
circumstances, to the branch profits tax) but will not be subject to
withholding. Foreign stockholders should consult applicable treaties, which may
provide for different rules.
Gain
recognized by a foreign stockholder upon a sale of either common stock or
preferred stock will generally not be subject to tax under FIRPTA if we are a
“domestically-controlled REIT,” which is defined generally as a REIT in which at
all times during a specified testing period less than 50% in value of its shares
were held directly or indirectly by non-U.S. persons. Because only a minority of
our stockholders are believed to be foreign stockholders, we anticipate that we
will qualify as a “domestically-controlled REIT.” Accordingly, a foreign
stockholder should not be subject to U.S. federal income tax from gains
recognized upon disposition of its shares.
On July
30, 2010, the House of Representatives passed H.R. 5901, which would increase
from 5 percent to 10 percent the amount of REIT stock that a foreign entity can
hold without being subject to FIRPTA. However, comparable legislation has not
yet been introduced in the Senate and it is unclear whether this change will be
enacted into law.
State,
Local, and Foreign Tax Consequences
State,
local, and foreign income tax laws may differ substantially from the
corresponding federal income tax laws, and this discussion does not purport to
describe any aspect of the tax laws of any state, local or foreign jurisdiction.
Consequently, we urge you to consult your tax advisor regarding the effect of
state, local, and/or foreign tax laws with respect to our treatment as a REIT
and an investment in Redwood.
PLAN
OF DISTRIBUTION
We may
sell the securities offered pursuant to any applicable prospectus supplement
directly to one or more purchasers or though dealers, agents, or underwriters.
We may sell the securities offered pursuant to any applicable prospectus
supplement in at-the-market equity offerings or on a negotiated or competitive
bid basis through underwriters or dealers or directly to other purchasers or
through agents. We will name any underwriter, dealer, or agent involved in the
offer and sale of the securities in the applicable prospectus supplement. We
reserve the right to sell the securities directly to investors on our own behalf
in those jurisdictions where and in such manner as we are authorized to do
so.
We may
distribute the securities from time to time in one or more
transactions:
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at
a fixed price or prices, which may be
changed;
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at
market prices prevailing at the time of
sale;
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at
prices related to prevailing market prices;
or
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at
negotiated prices.
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We may
also, from time to time, authorize underwriters, dealers, or other persons,
acting as our agents, to offer and sell the securities upon the terms and
conditions as are set forth in the applicable prospectus supplement. In
connection with the sale of the securities, underwriters may be deemed to have
received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of the securities
for whom they may act as agent. Underwriters may sell the securities to or
through dealers, and dealers may receive compensation in the form of discounts,
concessions, or commissions from the underwriters and/or commissions from the
purchasers for whom they may act as agent.
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We will
describe in the applicable prospectus supplement any underwriting compensation
we pay to underwriters or agents in connection with the offering of the
securities, and any discounts, concessions, or commissions allowed by
underwriters to participating dealers. Dealers and agents participating in the
distribution of the securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and
commissions. We may enter into agreements with any underwriters, dealers, and
agents which may entitle them to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act of
1933, as amended, or the Securities Act, and to reimbursement for certain
expenses. We will describe any indemnification agreements in the applicable
prospectus supplement.
Unless we
specify otherwise in the applicable prospectus supplement, any securities issued
hereunder other than shares of our common stock will be a new issue with no
established trading market. We may elect to list any of the securities issued
hereunder on any exchange, but we are not obligated to do so. It is possible
that one or more underwriters or agents may make a market in the securities
issued hereunder, including our common stock, but will not be obligated to do so
and may discontinue any market making at any time without notice. Therefore, we
cannot assure you as to the liquidity of the trading market for the
securities.
If
indicated in the applicable prospectus supplement, we may authorize
underwriters, dealers, or other persons acting as our agents to solicit offers
by certain institutions or other suitable persons to purchase the securities
from us at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on the
date or dates stated in the prospectus supplement. We may make delayed delivery
with various institutions, including commercial and savings banks, insurance
companies, pension funds, investment companies, and educational and charitable
institutions. Delayed delivery contracts will be subject to the condition that
the purchase of the securities covered by the delayed delivery contracts will
not at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which the purchaser is subject. The underwriters and agents
will not have any responsibility with respect to the validity or performance of
these contracts.
To
facilitate an offering of the securities, certain persons participating in the
offering may engage in transactions that stabilize, maintain, or otherwise
affect the price of the securities. This may include over-allotments or short
sales of the securities, which involves the sale by persons participating in the
offering of more securities than we sold to them. In these circumstances, these
persons would cover the over-allotments or short positions by making purchases
in the open market or by exercising their over-allotment option. In addition,
these persons may stabilize or maintain the price of the securities by bidding
for or purchasing securities in the open market or by imposing penalty bids,
whereby selling concessions allowed to dealers participating in the offering may
be reclaimed if securities sold by them are repurchased in connection with
stabilization transactions. The effect of these transactions may be to stabilize
or maintain the market price of the securities at a level above that which might
otherwise prevail in the open market. These transactions may be discontinued at
any time.
Certain
of the underwriters, dealers, or agents and their respective associates may be
customers of, and/or engage in transactions with, and perform services for us in
the ordinary course of business.
VALIDITY
OF THE SECURITIES
The
validity of certain securities will be passed upon for us by Venable LLP,
Baltimore, Maryland. The
validity of the debt securities will be passed upon for us by Latham &
Watkins LLP. Certain
tax matters will be passed upon for us by Chapman and Cutler LLP, San Francisco,
California. Certain matters relating to Delaware law regarding the validity of
the trust preferred securities will be passed upon for us by Richards, Layton
& Finger, P.A.
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EXPERTS
The
consolidated financial statements as of and for the years ended December 31,
2009 and 2008 and management’s assessment of the effectiveness of internal
control over financial reporting as of December 31, 2009 incorporated in this
prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 2009 (as amended by Amendment No. 1 on Form 10-K/A) have been so
incorporated in reliance on the reports of Grant Thornton LLP, independent
registered public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC
allows us to “incorporate by reference” the information we file with them which
means that we can disclose important information to you by referring you to
those documents instead of having to repeat the information in this prospectus.
The information incorporated by reference is considered to be part of this
prospectus, and later information that we file with the SEC will automatically
update and supersede this information. We incorporate by reference the following
documents:
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Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, which was
filed with the SEC on February 25,
2010;
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Amendment
No.1 on Form 10-K/A to Annual Report on Form 10-K for the fiscal year
ended December 31, 2009, which was filed with the SEC on February 26,
2010;
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Quarterly
Reports on Form 10-Q for the quarter ended March 31, 2010, which was filed
with the SEC on May 5, 2010, and for the quarter ended June 30, 2010,
which was filed with the SEC on August 4,
2010;
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Amendment
No. 1 on Form 10-Q/A for the quarter ended June 30, 2010, which was filed
with the SEC on August 6, 2010;
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Current
Reports on Form 8-K, filed with the SEC on January 26, 2010, March 18,
2010, and May 19, 2010;
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Proxy
Statement with respect to the 2010 Annual Meeting of Stockholders, which
was filed with the SEC on April 2,
2010;
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The
description of our common stock contained in our Registration Statement on
Form 8-A, which was filed with the SEC on January 7, 1998;
and
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All
documents filed by Redwood Trust, Inc. with the SEC pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act, after the date of this
prospectus and prior to the termination of the offering (but excluding any
items, documents, or portions of items or documents which are deemed
“furnished” and not filed with the
SEC).
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This
prospectus is part of a registration statement on Form S-3 we have filed with
the SEC under the Securities Act. This prospectus does not contain all of the
information in the registration statement. We have omitted certain parts of the
registration statement, as permitted by the rules and regulations of the SEC.
You may inspect and copy the registration statement, including exhibits, at the
SEC’s Public Reference Room or on our website at http://www.redwoodtrust.com.
Information
contained on our website is not and should not be deemed a part of this
prospectus or any other report or filing filed with the SEC. Our statements in
this prospectus about the contents of any contract or other document are not
necessarily complete. You should refer to the copy of each contract or other
document we have filed as an exhibit to the registration statement for complete
information.
We will
furnish without charge to you, upon written or oral request, a copy of any or
all of the documents incorporated by reference, including exhibits to these
documents. You should direct any requests for documents to:
Redwood
Trust, Inc.
Attn:
Investor Relations
One
Belvedere Place, Suite 300
Mill
Valley, CA 94941
(415)
389-7373
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WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarterly, and current reports, proxy statements and other information
with the SEC. You may read and copy any document we file at the SEC’s Public
Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. Our filings with the SEC are also available to the public at the SEC’s
website at http://www.sec.gov. You may
also obtain copies of the documents at prescribed rates by writing to the SEC’s
Public Reference Section at 100 F Street, N.E., Washington, D.C. 20549. Certain
of our filings with the SEC are available on our website at http://www.redwoodtrust.com.
Information contained on our website is not and should not be deemed a
part of this prospectus or any other report or filing filed with the
SEC.
-40-
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance
and Distribution.
The
following table itemizes the expenses incurred by the Registrant in connection
with the issuance and registration of the securities being registered hereunder.
All amounts shown are estimates except the Securities and Exchange Commission
registration fee.
|
SEC
registration fee
|
$
|
|
(1)
|
|
|
Printing
and engraving expenses
|
$
|
|
(2)
|
|
|
Legal
fees and expenses
|
$
|
|
(2)
|
|
|
Accounting
fees and expenses
|
$
|
|
(2)
|
|
|
Blue
Sky fees and expenses
|
$
|
|
(2)
|
|
|
Fees
of rating agencies
|
$
|
|
(2)
|
|
|
Trustee
fees and expenses
|
$
|
|
(2)
|
|
|
Miscellaneous
fees and expenses
|
$
|
|
(2)
|
|
|
Total
|
$
|
|
(2)
|
(1) Under
SEC Rules 456(b) and 457(r), the SEC registration fee will be paid at the time
of any particular offering of securities under the registration statement, and
is therefore not currently determinable.
(2) These
fees are calculated based on the securities offered and the number of issuances
and accordingly cannot be estimated at this time.
-41-
Item
15. Indemnification of
Directors and Officers.
Maryland
law permits a Maryland corporation to include in its charter a provision
limiting the liability of its directors and officers to the corporation and its
stockholders for money damages except for liability resulting from (a) actual
receipt of an improper benefit or profit in money, property, or services or (b)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The charter of the registrant contains such a
provision which eliminates such liability to the maximum extent permitted by
Maryland law.
The
charter and bylaws of the registrant require it, to the maximum extent permitted
by Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer or (b) any individual who, while a director or officer of
the registrant and at the request of the registrant, serves or has served as a
director, officer, partner, or trustee of another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan, or
any other enterprise from and against any claim or liability to which such
person may become subject or which such person may incur by reason of his or her
service in any such capacity. The bylaws of the registrant establish certain
procedures for indemnification and advance of expenses pursuant to applicable
law and the registrant's charter. The charter and bylaws also permit the
registrant to indemnify and advance expenses to any person who served a
predecessor of the registrant in any of the capacities described above and to
any employee or agent of the registrant or a predecessor of the
registrant.
The MGCL
requires a corporation (unless its charter provides otherwise, which the
registrant's charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he or she is made, or threatened to be made, a party by reason of his or
her service in that capacity. The MGCL permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made, or threatened to be
made, a party by reason of their service in those or other capacities unless it
is established that (a) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (i) was committed in
bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property, or services or (c) in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was
unlawful. However, under the MGCL, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation or for a
judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification, and then only
for expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (a) a
written affirmation by the director or officer of his or her good faith belief
that he or she has met the standard of conduct necessary for indemnification by
the corporation and (b) a written undertaking by him or her or on his or her
behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not
met.
-42-
Item
16. Exhibits
|
Exhibit
Number
|
Description
|
|
|
1.1
|
Underwriting
Agreement(1)
|
|
|
4.1
|
Articles
of Amendment and Restatement of the Registrant, effective July 6, 1994
(incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q, Exhibit 3.1, filed on August 6, 2008)
|
|
|
4.1.1
|
Articles
Supplementary of the Registrant, effective August 10, 1994 (incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.1, filed on August 6, 2008)
|
|
|
4.1.2
|
Articles
Supplementary of the Registrant, effective August 11, 1995 (incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.2, filed on August 6, 2008)
|
|
|
4.1.3
|
Articles
Supplementary of the Registrant, effective August 9, 1996 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.3, filed on August 6, 2008)
|
|
|
4.1.4
|
Certificate
of Amendment of the Registrant, effective June 30, 1998 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.4, filed on August 6, 2008)
|
|
|
4.1.5
|
Articles
Supplementary of the Registrant, effective April 7, 2003 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.5, filed on August 6, 2008)
|
|
|
4.1.6
|
Articles
Supplementary of the Registrant, effective June 12, 2008 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.6, filed on August 6, 2008)
|
|
|
4.1.7
|
Articles
of Amendment effective May 19, 2009 (incorporated by reference to the
Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21,
2009)
|
|
|
4.2
|
Amended
and Restated Bylaws, as adopted on March 5, 2008 (incorporated by
reference to Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed
on March 11, 2008)
|
|
|
4.3
|
Form
of Common Stock Certificate (incorporated by reference to the Registrant’s
Registration Statement on Form S-11 (No. 333-08363), Exhibit 4.3, filed on
August 6, 1996)
|
|
|
4.4
|
Form
of Preferred Stock Certificate(1)
|
|
|
4.5
|
Form
of Debt Security(1)
|
|
|
4.6
|
Form
of Indenture (incorporated by reference to the Registrant’s Registration
Statement on Form S-3 (No. 333-147604), Exhibit 4.6, filed on November 23,
2007)
|
|
|
4.7
|
Form
of Warrant(1)
|
|
|
4.8
|
Form
of Warrant Agreement(1)
|
|
|
4.9
|
Certificate
of Trust of Redwood Capital Trust II
|
|
|
4.10
|
Trust
Agreement of Redwood Capital Trust II by and between Redwood Trust, Inc.,
as sponsor, and Wells Fargo Delaware Trust Company, N.A., as Delaware
trustee
|
|
|
4.11
|
Form
of Amended and Restated Trust Agreement of Redwood Capital Trust II among
Redwood Trust, Inc., as depositor, Wells Fargo Bank, N.A., as property
trustee, Wells Fargo Delaware Trust Company, N.A., as Delaware trustee,
and the Regular Trustees named therein, as regular
trustees
|
|
|
4.12
|
Form
of Trust Preferred Security of Redwood Capital Trust II (included in
Exhibit 4.11)
|
|
|
4.13
|
Form
of Guarantee Agreement for Redwood Capital Trust II by and between Redwood
Trust, Inc., as guarantor, and Wells Fargo Bank, N.A., as
trustee.
|
|
|
5.1
|
Opinion
of Venable LLP
|
|
|
5.2
|
Opinion
of Latham & Watkins LLP
|
| 5.3 | Opinion of Richards, Layton & Finger, P.A. | |
|
8.1
|
Opinion
of Chapman and Cutler LLP
|
-43-
|
12.1
|
Statement
of Computation of Ratios
|
|
|
23.1
|
Consent
of Grant Thornton LLP
|
|
|
23.2
|
Consent
of Venable LLP (contained in Exhibit 5.1)
|
|
| 23.3 | Consent of Latham & Watkins LLP (contained in Exhibit 5.2) | |
| 23.4 | Consent of Richards, Layton & Finger, P.A. (contained in Exhibit 5.3) | |
|
23.5
|
Consent
of Chapman and Cutler LLP (contained in Exhibit 8.1)
|
|
|
24.1
|
Power
of Attorney (included on signature page to this Registration
Statement)
|
|
|
25.1
|
Statement
of Eligibility of Trustee on Form T-1(1)
|
(1) To
be filed by amendment or incorporated by reference in connection with the
offering of securities.
-44-
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 in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the SEC pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
“Calculation of Registration Fee” table in the effective registration statement;
and
(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), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if
the registration statement is on Form S-3 or Form F-3 and the information
required to be included in a post-effective amendment by those paragraphs is
contained in reports filed with or furnished to the SEC by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement, or is
contained in a form of prospectus filed pursuant to Rule 424(b) that is part of
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.
(4) That,
for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
(i) Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to
be part of the registration statement as of the date the filed prospectus was
deemed part of and included in the registration statement; and
(ii) Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as
part of a registration statement in reliance on Rule 430B relating to an
offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of
providing the information required by section 10(a) of the Securities Act of
1933 shall be deemed to be part of and included in the registration statement as
of the earlier of the date such form of prospectus is first used after
effectiveness or the date of the first contract of sale of securities in the
offering described in the prospectus. As provided in Rule 430B, for liability
purposes of the issuer and any person that is at that date an underwriter, such
date shall be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. Provided, however, that no
statement made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of contract of sale
prior to such effective date, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the registration
statement or made in any such document immediately prior to such effective
date.
-45-
(5)
That, for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities: The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to
the purchaser, if the securities are offered or sold to such purchaser by means
of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to Rule 424;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(b) The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) The
undersigned registrant hereby undertakes to file an application for the purpose
of determining the eligibility of the trustee to act under subsection (a) of
section 310 of the Trust Indenture Act (“Act”) in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the
Act.
(d)
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 SEC 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 being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
-46-
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, Redwood Trust, Inc. certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Mill Valley, State of California, on this 6th day of August
2010.
|
REDWOOD
TRUST, INC.
|
||
|
By:
|
/s/ Martin S. Hughes
|
|
|
Name:
Martin S. Hughes
|
||
|
Title: President
and Chief Executive Officer
|
||
Pursuant
to the requirements of the Securities Act of 1933, Redwood Capital Trust II
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Mill Valley, State of California, on this 6th day of
August 2010.
|
REDWOOD
CAPITAL TRUST II
|
||
|
By:
|
Redwood
Trust, Inc.,
as
Sponsor
|
|
|
By:
|
/s/ Martin S. Hughes
|
|
|
Name:
Martin S. Hughes
|
||
|
Title: President
and Chief Executive Officer
|
||
-47-
POWER
OF ATTORNEY
KNOW ALL
PERSONS BY THESE PRESENT, that each person whose signature appears below
constitutes and appoints Martin S. Hughes, Brett D. Nicholas, Harold F. Zagunis,
and each or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments or any abbreviated registration statement and any
amendments thereto filed pursuant to Rule 462(b) increasing the number of
securities for which registration is sought) to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
-48-
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated:
|
Signature
|
Title
|
Date
|
||
|
/s/ Martin
S. Hughes
|
President
and Chief Executive Officer
|
August
6, 2010
|
||
|
Martin
S. Hughes
|
(Principal
Executive Officer)
|
|||
|
/s/ Diane
L. Merdian
|
Chief
Financial Officer
|
August
6, 2010
|
||
|
Diane
L. Merdian
|
(Principal
Financial Officer)
|
|||
|
/s/ Christopher
J. Abate
|
Managing
Director and Controller
|
August
6, 2010
|
||
|
Christopher
J. Abate
|
(Principal
Accounting Officer)
|
|||
|
/s/ George
E. Bull, III
|
Chairman
of the Board, Director
|
August
6, 2010
|
||
|
George
E. Bull, III
|
||||
|
|
|
|||
|
/s/
Richard
D. Baum
|
Director
|
August
6, 2010
|
||
|
Richard
D. Baum
|
||||
|
/s/
Thomas
C. Brown
|
Director
|
August
6, 2010
|
||
|
Thomas
C. Brown
|
||||
|
/s/
Mariann
Byerwalter
|
Director
|
August
6, 2010
|
||
|
Mariann
Byerwalter
|
||||
|
/s/
Douglas
B. Hansen
|
Director
|
August
6, 2010
|
||
|
Douglas
B. Hansen
|
||||
|
/s/
Greg
H. Kubicek
|
Director
|
August
6, 2010
|
||
|
Greg
H. Kubicek
|
||||
|
/s/
Jeffrey
T. Pero
|
Director
|
August
6, 2010
|
||
|
Jeffrey
T. Pero
|
||||
|
/s/
Georganne
C. Proctor
|
Director
|
August
6, 2010
|
||
|
Georganne
C. Proctor
|
||||
|
Director
|
|
|||
|
Charles
J. Toeniskoetter
|
-49-
EXHIBIT
INDEX
|
Exhibit
Number
|
Description
|
|
|
1.1
|
Underwriting
Agreement(1)
|
|
|
4.1
|
Articles
of Amendment and Restatement of the Registrant, effective July 6, 1994
(incorporated by reference to the Registrant’s Quarterly Report on Form
10-Q, Exhibit 3.1, filed on August 6, 2008)
|
|
|
4.1.1
|
Articles
Supplementary of the Registrant, effective August 10, 1994 (incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.1, filed on August 6, 2008)
|
|
|
4.1.2
|
Articles
Supplementary of the Registrant, effective August 11, 1995 (incorporated
by reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.2, filed on August 6, 2008)
|
|
|
4.1.3
|
Articles
Supplementary of the Registrant, effective August 9, 1996 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.3, filed on August 6, 2008)
|
|
|
4.1.4
|
Certificate
of Amendment of the Registrant, effective June 30, 1998 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.4, filed on August 6, 2008)
|
|
|
4.1.5
|
Articles
Supplementary of the Registrant, effective April 7, 2003 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.5, filed on August 6, 2008)
|
|
|
4.1.6
|
Articles
Supplementary of the Registrant, effective June 12, 2008 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q, Exhibit
3.1.6, filed on August 6, 2008)
|
|
|
4.1.7
|
Articles
of Amendment effective May 19, 2009 (incorporated by reference to the
Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed on May 21,
2009)
|
|
|
4.2
|
Amended
and Restated Bylaws, as adopted on March 5, 2008 (incorporated by
reference to Registrant’s Current Report on Form 8-K, Exhibit 3.1, filed
on March 11, 2008)
|
|
|
4.3
|
Form
of Common Stock Certificate (incorporated by reference to the Registrant’s
Registration Statement on Form S-11 (No. 333-08363), Exhibit 4.3, filed on
August 6, 1996)
|
|
|
4.4
|
Form
of Preferred Stock Certificate(1)
|
|
|
4.5
|
Form
of Debt Security(1)
|
|
|
4.6
|
Form
of Indenture (incorporated by reference to the Registrant’s Registration
Statement on Form S-3 (No. 333-147604), Exhibit 4.6, filed on November 23,
2007)
|
|
|
4.7
|
Form
of Warrant(1)
|
|
|
4.8
|
Form
of Warrant Agreement(1)
|
|
|
4.9
|
Certificate
of Trust of Redwood Capital Trust II
|
|
|
4.10
|
Trust
Agreement of Redwood Capital Trust II by and between Redwood Trust, Inc.,
as sponsor, and Wells Fargo Delaware Trust Company, N.A., as Delaware
trustee
|
|
|
4.11
|
Form
of Amended and Restated Trust Agreement of Redwood Capital Trust II among
Redwood Trust, Inc., as depositor, Wells Fargo Bank, N.A., as property
trustee, Wells Fargo Delaware Trust Company, N.A., as Delaware trustee,
and the Regular Trustees named therein, as regular
trustees
|
|
|
4.12
|
Form
of Trust Preferred Security of Redwood Capital Trust II (included in
Exhibit 4.11)
|
|
|
4.13
|
Form
of Guarantee Agreement for Redwood Capital Trust II by and between Redwood
Trust, Inc., as guarantor, and Wells Fargo Bank, N.A., as
trustee.
|
|
|
5.1
|
Opinion
of Venable LLP
|
|
|
5.2
|
Opinion
of Latham & Watkins LLP
|
|
| 5.3 | Opinion of Richards, Layton & Finger, P.A. |
-50-
|
8.1
|
Opinion
of Chapman and Cutler LLP
|
|
|
12.1
|
Statement
of Computation of Ratios
|
|
|
23.1
|
Consent
of Grant Thornton LLP
|
|
|
23.2
|
Consent
of Venable LLP (contained in Exhibit 5.1)
|
|
| 23.3 | Consent of Latham & Watkins LLP (contained in Exhibit 5.2) | |
| 23.4 | Consent of Richards, Layton & Finger, P.A. (contained in Exhibit 5.3) | |
|
23.5
|
Consent
of Chapman and Cutler LLP (contained in Exhibit 8.1)
|
|
|
24.1
|
Power
of Attorney (included on signature page to this Registration
Statement)
|
|
|
25.1
|
Statement
of Eligibility of Trustee on Form T-1(1)
|
(1) To be
filed by amendment or incorporated by reference in connection with the offering
of securities.
-51-