PURCHASE AGREEMENT among REDWOOD TRUST, INC. and OBSIDIAN CDO WAREHOUSE, LLC Dated as of May 23, 2007
among
REDWOOD
TRUST, INC.
and
OBSIDIAN
CDO WAREHOUSE, LLC
________________
Dated
as
of May 23, 2007
________________
($50,000,000
Aggregate Liquidation Amount of Subordinated Notes)
THIS
PURCHASE AGREEMENT, dated as of May 23, 2007 (this “Purchase
Agreement”),
is
entered into among Redwood Trust, Inc., a Maryland corporation (the
“Company”),
and
Obsidian CDO Warehouse, LLC or its assignee (the “Purchaser”).
WITNESSETH:
WHEREAS,
the Company proposes to issue and sell Fifty Million ($50,000,000) in principal
amount of the unsecured subordinated notes of the Company (the “Securities”),
bearing a variable rate, reset quarterly, equal to LIBOR (as defined in the
Indenture (as defined below)) plus 2.25% per annum; and
WHEREAS,
the Securities will be issued pursuant to a Subordinated Indenture, dated as
of
the Closing Date (the “Indenture”),
between the Company and Wilmington Trust Company, a Delaware banking
corporation, as trustee (in such capacity, the “Indenture
Trustee”).
NOW,
THEREFORE, in consideration of the mutual agreements and subject to the terms
and conditions herein set forth, the parties hereto agree as
follows:
1. Definitions.
This
Purchase Agreement, the Indenture and the Securities are collectively referred
to herein as the “Operative
Documents.”
All
other capitalized terms used but not defined in this Purchase Agreement shall
have the respective meanings ascribed thereto in the Indenture.
2. Purchase
and Sale of the Securities.
(a) The
Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase
from the Company, the Securities for an aggregate amount (the “Purchase
Price”)
equal
to Fifty Million Dollars ($50,000,000), net of the placement fee and expenses
as
set forth in the Flow of Funds, dated as of the date hereof. The Purchaser
shall
be responsible for the rating agency costs and expenses.
(b) Delivery
or transfer of, and payment for, the Securities shall be made at 11:00 A.M.
New
York time, on May 23, 2007 or such later date (not later than 30 days later)
as
the parties may designate (such date and time of delivery and payment for the
Securities being herein called the “Closing
Date”).
The
Securities shall be transferred and delivered to the Purchaser against the
payment of the Purchase Price to the Company made by wire transfer in
immediately available funds on the Closing Date to a U.S. account designated
in
writing by the Company at least two business days prior to the Closing
Date.
(c) Delivery
of the Securities shall be made at such location, and in such names and
denominations, as the Purchaser shall designate at least two business days
in
advance of the Closing Date. The Company agrees to have the Securities available
for inspection and checking by the Purchaser in Chicago, Illinois, not later
than 2:00 P.M. Chicago time on the business day prior to the Closing Date.
The
closing for the purchase and sale of the Securities shall occur at the offices
of Mayer, Brown, Xxxx & Maw LLP, 00 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx
00000 or such other place as the parties hereto shall agree.
3. Conditions.
The
obligations of the parties under this Purchase Agreement are subject to the
following conditions:
(a) The
representations and warranties contained herein shall be accurate as of the
date
of delivery of the Securities.
(b) Xxxxx
Xxxxx Xxxx & Maw LLP, counsel for the Company (the “Company
Counsel”),
shall
have delivered an opinion, dated the Closing Date, addressed to the Purchaser
and Wilmington Trust Company, in substantially the form set out in Annex
A-I hereto
and the Company shall have furnished to the Purchaser a certificate signed
by
the Company’s Chief Executive Officer, President, an Executive Vice President,
Chief Financial Officer, Treasurer or Assistant Treasurer, dated the Closing
Date, addressed to the Purchaser, in substantially the form set out in
Annex
A-II
hereto.
In rendering its opinion, the Company Counsel may rely as to factual matters
upon certificates or other documents furnished by officers, directors and
trustees of the Company and by government officials (provided, however, that
copies of any such certificates or documents are delivered to the Purchaser)
and
by and upon such other documents as such counsel may, in its reasonable opinion,
deem appropriate as a basis for the Company Counsel’s opinion. The Company
Counsel may specify the jurisdictions in which it is admitted to practice and
that it is not admitted to practice in any other jurisdiction and is not an
expert in the law of any other jurisdiction. Such Company Counsel Opinion shall
not state that it is to be governed or qualified by, or that it is otherwise
subject to, any treatise, written policy or other document relating to legal
opinions, including, without limitation, the Legal Opinion Accord of the ABA
Section of Business Law (1991).
(c) The
Purchaser shall have been furnished the opinion of Xxxxxxx and Xxxxxx LLP,
dated
the Closing Date, addressed to the Purchaser and Wilmington Trust Company,
in
substantially the form set out in Annex
B
hereto.
(d) The
Purchaser shall have received the opinion of Xxxxxxxx, Xxxxxx & Finger,
P.A., counsel for the Indenture Trustee, dated the Closing Date, addressed
to
the Purchaser, in substantially the form set out in Annex
C
hereto.
(e) The
Company shall have furnished to the Purchaser a certificate of the Company,
signed by the Chief Executive Officer, President or an Executive Vice President,
and Chief Financial Officer, Treasurer or Assistant Treasurer of the Company,
dated the Closing Date, as to (i) and (ii) below:
(i) the
representations and warranties in this Purchase Agreement are true and correct
on and as of the Closing Date with the same effect as if made on the Closing
Date, and the Company has complied with all the agreements and satisfied all
the
conditions on its part to be performed or satisfied at or prior to the Closing
Date; and
(ii) since
the
date of the Interim Financial Statements (as defined below), there has been
no
material adverse change in the condition (financial or other), earnings,
business or assets of the Company and its subsidiaries, whether or not arising
from transactions occurring in the ordinary course of business (a “Material
Adverse Change”).
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(f) Subsequent
to the execution of this Purchase Agreement, there shall not have been any
change, or any development involving a prospective change, in or affecting
the
condition (financial or other), earnings, business or assets of the Company
and
its subsidiaries, whether or not occurring in the ordinary course of business,
the effect of which is, in the Purchaser’s judgment, so material and adverse as
to make it impractical or inadvisable to proceed with the purchase of the
Securities.
(g) Prior
to
the Closing Date, the Company shall have furnished to the Purchaser and its
counsel such further information, certificates and documents as the Purchaser
or
its counsel may reasonably request.
If
any of
the conditions specified in this Section 3
shall
not have been fulfilled when and as provided in this Purchase Agreement, or
if
any of the opinions, certificates and documents mentioned above or elsewhere
in
this Purchase Agreement shall not be reasonably satisfactory in form and
substance to the Purchaser or its counsel, this Purchase Agreement and all
the
Purchaser’s obligations hereunder may be canceled at, or at any time prior to,
the Closing Date by the Purchaser. Notice of such cancellation shall be given
to
the Company in writing or by telephone or facsimile confirmed in
writing.
Each
certificate signed by any officer of the Company and delivered to the Purchaser
or the Purchaser’s counsel in connection with the Operative Documents and the
transactions contemplated hereby and thereby shall be deemed to be a
representation and warranty of the Company and not by such officer in any
individual capacity.
4. Representations
and Warranties of the Company.
The
Company represents and warrants to, and agree with the Purchaser, as
follows:
(a) Neither
the Company nor any of its “Affiliates” (as defined in Rule 501(b) of Regulation
D (“Regulation
D”)
under
the Securities Act (as defined below)), nor any person acting on its behalf,
has, directly or indirectly, made offers or sales of any security, or solicited
offers to buy any security, under circumstances that would require the
registration of any of the Securities under the Securities Act of 1933, as
amended (the “Securities
Act”).
(b) Neither
the Company nor any of its Affiliates, nor any person acting on its behalf,
has
engaged in any form of general solicitation or general advertising (within
the
meaning of Regulation D) in connection with any offer or sale of any of the
Securities.
(c) The
Securities (i) are not and have not been listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of 1934,
as
amended (the “Exchange
Act”),
or
quoted on a U.S. automated inter-dealer quotation system and (ii) are not of
an
open-end investment company, unit investment trust or face-amount certificate
company that are, or are required to be, registered under Section 8 of the
Investment Company Act of 1940, as amended (the “Investment
Company Act”),
and
the Securities otherwise satisfy the eligibility requirements of Rule 144A(d)(3)
promulgated pursuant to the Securities Act (“Rule
144A(d)(3)”).
3
(d) Neither
the Company nor any of its Affiliates, nor any person acting on its behalf,
has
engaged, or will engage, in any “directed selling efforts” within the meaning of
Regulation S under the Securities Act with respect to the
Securities.
(e) The
Company is not and, immediately following consummation of the transactions
contemplated hereby and the application of the net proceeds therefrom, will
not
be, an “investment company” within the meaning of Section 3(a) of the Investment
Company Act.
(f) The
Company has not paid or agreed to pay to any person any compensation for
soliciting another to purchase any of the Securities, except for the placement
fee of three percent (3%) the Company has agreed to pay to X.X. Xxxxxx
Securities, Inc. pursuant to the letter agreement between the Company and Coredo
Capital Management, LLC, dated April 16, 2007.
(g) The
Indenture has been duly authorized by the Company and, on the Closing Date,
will
have been duly executed and delivered by the Company, and, assuming due
authorization, execution and delivery by the Indenture Trustee, will be a legal,
valid and binding obligation of the Company enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency and similar laws
affecting creditors’ rights generally and to general principles of
equity.
(h) The
Securities have been duly authorized by the Company and, on the Closing Date,
will have been duly executed and delivered to the Indenture Trustee for
authentication in accordance with the Indenture and, when authenticated in
the
manner provided for in the Indenture and delivered to the Purchaser against
payment therefor in accordance herewith, will constitute legal, valid and
binding obligations of the Company entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and to general principles of equity.
(i) This
Purchase Agreement has been duly authorized, executed and delivered by the
Company.
(j) Neither
the issue and sale of the Securities, nor the execution and delivery of and
compliance with the Operative Documents by the Company, nor the consummation
of
the transactions contemplated herein or therein, (i) will conflict with or
constitute a violation or breach of the charter or bylaws or similar
organizational documents of the Company, (ii) will conflict with or constitute
a
violation or breach of the charter or bylaws or similar organizational documents
of any subsidiary of the Company or any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, governmental
authority, agency or instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or their respective
properties or assets (collectively, the “Governmental
Entities”),
(iii)
will conflict with or constitute a violation or breach of, or a default or
Repayment Event (as defined below) under, or result in the creation or
imposition of any pledge, security interest, claim, lien or other encumbrance
of
any kind (each, a “Lien”)
upon
any property or assets of the Company or any of the Company’s subsidiaries
pursuant to any contract, indenture, mortgage, loan agreement, note, lease
or
other agreement or instrument to which (A) the Company or any of its
subsidiaries is a party or by which it or any of them may be bound, or (B)
any
of the property or assets of any of them is subject, or any judgment, order
or
decree of any court, Governmental Entity or arbitrator, except, in the case
of
this clauses (ii) or (iii), for such conflicts, breaches, violations, defaults,
Repayment Events (as defined below) or Liens which (X) would not, singly or
in
the aggregate, adversely affect the consummation of the transactions
contemplated by the Operative Documents and (Y) would not, singly or in the
aggregate, reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), earnings, business, liabilities or assets
(taken as a whole) of the Company and its subsidiaries taken as a whole, whether
or not occurring in the ordinary course of business (a “Material
Adverse Effect”)
or
(iv) require the consent, approval, authorization or order of any court or
Governmental Entity (collectively, the “Consents”),
except any such Consent as has already been received or obtained. As used
herein, a “Repayment
Event”
means
any event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder’s behalf) the
right to require the repurchase, redemption or repayment of all or a portion
of
such indebtedness by the Company or any of its subsidiaries prior to its
scheduled maturity.
4
(k) The
Company has been duly incorporated and is validly existing as a corporation
in
good standing under the laws of the State of Maryland, with all requisite
corporate power
and
authority to own, lease and operate its properties and conduct the business
it
transacts and proposes to transact, and is duly qualified to transact business
and is in good standing in each jurisdiction where the nature of its activities
requires such qualification, except where the failure of the Company to be
so
qualified would not, singly or in the aggregate, reasonably be expected to
have
a Material Adverse Effect.
(l) The
Company has no subsidiaries that are material to its business, financial
condition or earnings other than those subsidiaries listed in Schedule
1
attached
hereto (which Schedule
1
includes
each of the Company’s “significant subsidiaries” as defined in Securities and
Exchange Commission Regulation S-X) (collectively, the “Significant
Subsidiaries”).
The
Significant Subsidiary is a corporation duly incorporated or organized or
formed, as the case may be, validly existing and in good standing under the
laws
of the jurisdiction in which it is chartered or organized or formed, with all
requisite corporate, partnership or limited liability company, as the case
may
be, power and authority to own, lease and operate its properties and conduct
the
business it transacts and proposes to transact. The Significant Subsidiary
is
duly qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction where the nature of its activities requires such
qualification, except where the failure to be so qualified would not, singly
or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
The
Significant Subsidiary (other than a taxable REIT subsidiary, if any) is not
currently prohibited, directly or indirectly, under any agreement or other
instrument, other than as required by applicable law, to which it is a party
or
is subject, from paying any dividends to the Company, from making any other
distribution on such Significant Subsidiary’s capital stock or other Equity
Interests, from repaying to the Company any loans or advances to such
Significant Subsidiary from the Company or from transferring any of such
Significant Subsidiary’s properties or assets to the Company or any other
subsidiary of the Company. As used herein, the term “Equity
Interests”
means
the shares or stock interests (both common stock and preferred stock) in a
corporation.
5
(m) Each
of
the Company and each of the Company’s subsidiaries holds all necessary
approvals, authorizations, orders, licenses, consents, registrations,
qualifications, certificates and permits (collectively, the “Governmental
Licenses”)
of and
from Governmental Entities necessary to conduct its business as now being
conducted, and neither the Company nor any of the Company’s subsidiaries has
received any notice of proceedings relating to the revocation or modification
of
any such Government License, except where the failure to be so licensed or
approved or the receipt of an unfavorable decision, ruling or finding, would
not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect; all of the Governmental Licenses are valid and in full force
and
effect, except where the invalidity or the failure of such Governmental Licenses
to be in full force and effect, would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and the Company and
its subsidiaries are in compliance with all applicable laws, rules, regulations,
judgments, orders, decrees and consents, except where the failure to be in
compliance would not, singly or in the aggregate, reasonably be expected to
have
a Material Adverse Effect.
(n) All
of
the issued and outstanding Equity Interests of the Company and its Significant
Subsidiary are validly issued, fully paid and non-assessable; all of the issued
and outstanding Equity Interests of the Significant Subsidiary are owned by
the
Company, directly or through subsidiaries, free and clear of any Lien, claim
or
equitable right; and none of the issued and outstanding Equity Interests of
the
Company or the Significant Subsidiary were issued in violation of any preemptive
or similar rights arising by operation of law, under the charter or by-laws
or
similar organizational documents of such entity or under any agreement to which
the Company or its Significant Subsidiary is a party.
(o) Neither
the Company nor any of its subsidiaries is (i) in violation of its respective
charter or by-laws or similar organizational documents or (ii) in default in
the
performance or observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan agreement, note, lease
or
other agreement or instrument to which the Company or any such subsidiary is
a
party or by which it or any of them may be bound or to which any of the property
or assets of any of them is subject, except, in the case of clause (ii), where
such violation or default would not, singly or in the aggregate, reasonably
be
expected to have a Material Adverse Effect.
(p) There
is
no action, suit or proceeding before or by any Governmental Entity, arbitrator
or court, domestic or foreign, now pending or, to the knowledge of the Company
after due inquiry, threatened against or affecting the Company or any of the
Company’s subsidiaries, except for such actions, suits or proceedings that, if
adversely determined, would not, singly or in the aggregate, adversely affect
the consummation of the transactions contemplated by the Operative Documents
or
reasonably be expected to have a Material Adverse Effect; and the aggregate
of
all pending legal or governmental proceedings to which the Company or any of
its
subsidiaries is a party or of which any of their respective properties or assets
is subject, including ordinary routine litigation incidental to the business,
are not reasonably expected to result in a Material Adverse Effect.
6
(q) The
accountants of the Company who certified the Financial Statements (as defined
below) are independent public accountants of the Company and its subsidiaries
within the meaning of the Securities Act, and the rules and regulations of
the
Securities and Exchange Commission (the “Commission”)
thereunder.
(r) The
audited consolidated financial statements (including the notes thereto) and
schedules of the Company and its consolidated subsidiaries for the fiscal year
ended December 31, 2006 (the “Financial
Statements”)
and
the interim unaudited consolidated financial statements of the Company and
its
consolidated subsidiaries for the quarter ended March 31, 2007 (the
“Interim
Financial Statements”)
provided to the Purchaser are the most recent available audited and unaudited
consolidated financial statements of the Company and its consolidated
subsidiaries, respectively, and fairly present in all material respects, in
accordance with U.S. generally accepted accounting principles (“GAAP”),
the
financial position of the Company and its consolidated subsidiaries, and the
results of operations and changes in financial condition as of the dates and
for
the periods therein specified, subject, in the case of Interim Financial
Statements, to year-end adjustments (which are expected to consist solely of
normal recurring adjustments). Such consolidated financial statements and
schedules have been prepared in accordance with GAAP consistently applied
throughout the periods involved (except as otherwise noted
therein).
(s) None
of
the Company nor any of the Company’s subsidiaries has any material liability
required to be reflected in the Financial Statements and Interim Financial
Statements in accordance with GAAP, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due, including any liability for
taxes (and there is no past or present fact, situation, circumstance, condition
or other basis for any present or future action, suit, proceeding, hearing,
charge, complaint, claim or demand against the Company or its subsidiaries
that
could give rise to any such liability), except for (i) liabilities set
forth in the Financial Statements or the Interim Financial Statements and
(ii) normal fluctuations in the amount of the liabilities referred to in
clause (i) above occurring in the ordinary course of business of the
Company and/or its subsidiaries since the date of the most recent balance sheet
included in such Financial Statements.
(t) Since
the
respective dates of the Financial Statements and the Interim Financial
Statements, there has not been (A) any Material Adverse Change or (B) any
dividend or distribution of any kind declared, paid or made by the Company
on
any class of its capital stock other than regular quarterly or yearly special
dividends on the Company’s common stock.
(u) The
documents of the Company filed with the Commission in accordance with the
Exchange Act, from and including the commencement of the fiscal year covered
by
the Company’s most recent Annual Report on Form 10-K, at the time they were or
hereafter are filed by the Company with the Commission (collectively, the
“1934
Act Reports”),
complied and will comply in all material respects with the requirements of
the
Exchange Act and the rules and regulations of the Commission thereunder (the
“1934
Act Regulations”),
and,
at the date of this Purchase Agreement and on the Closing Date, do not and
will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
and other than such instruments, agreements, contracts and other documents
as
are filed as exhibits to the Company’s Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q or Current Reports on Form 8-K, there are no instruments,
agreements, contracts or documents of a character described in Item 601 of
Regulation S-K promulgated by the Commission to which the Company or any of
its subsidiaries is a party. The Company is in compliance with all currently
applicable requirements of the Exchange Act that were added by the
Xxxxxxxx-Xxxxx Act of 2002, except as would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
7
(v) No
labor
dispute with the employees of the Company or the Significant Subsidiary exists
or, to the knowledge of the executive officers of the Company, is imminent,
except those which would not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(w) No
filing
with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any Governmental Entity, other than those that
have
been made or obtained, is necessary or required for the performance by the
Company of their respective obligations under the Operative Documents, as
applicable, or the consummation by the Company of the transactions contemplated
by the Operative Documents.
(x) Commencing
with its taxable year ended December 31, 1994 the Company has been, and upon
the
completion of the transactions contemplated hereby, the Company will continue
to
be, organized and operated in conformity with the requirements for qualification
and taxation as a real estate investment trust (a “REIT”)
under
sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
“Code”),
and
the Company’s proposed method of operation will enable it to continue to meet
the requirements for qualification and taxation as a REIT under the Code, and
no
actions have been taken (or not taken which are required to be taken) which
would cause such qualification to be lost. The Company expects to continue
to be
organized and to operate in a manner so as to qualify as a REIT in the taxable
year ending December 31, 2007 and succeeding taxable years for so long as the
Company determines that it is in its best interest to remain qualified as a
REIT.
(y) Each
of
the Company and the Significant Subsidiary has timely and duly filed all Tax
Returns (as defined below) required to be filed by them, and all such Tax
Returns are true, correct and complete in all material respects. The Company
and
the Significant Subsidiary have timely and duly paid in full all material Taxes
(as defined below) required to be paid by them (whether or not such amounts
are
shown as due on any Tax Return). There are no federal, state, or other Tax
audits or deficiency assessments proposed or pending with respect to the Company
or the Significant Subsidiary, and no such audits or assessments are threatened.
As used herein, the terms “Tax”
or
“Taxes”
mean
(i) all federal, state, local, and foreign taxes, and other assessments of
a
similar nature (whether imposed directly or through withholding), including
any
interest, additions to tax, or penalties applicable thereto, imposed by any
Governmental Entity, and (ii) all liabilities in respect of such amounts arising
as a result of being a member of any affiliated, consolidated, combined, unitary
or similar group, as a successor to another person or by contract. As used
herein, the term “Tax
Returns”
means
all federal, state, local, and foreign Tax returns, declarations, statements,
reports, schedules, forms, and information returns and any amendments thereto
filed or required to be filed with any Governmental Entity.
8
(z) Interest
payable by the Company on the Securities is deductible by the Company, in whole
or in part, for U.S. federal income tax purposes. To the knowledge of the
Company, there are no audits, investigations or similar proceedings before
the
U.S. Internal Revenue Service or comparable federal, state, local or foreign
government bodies which involve or affect the Company or any subsidiary, which,
if the subject of an action unfavorable to the Company or any subsidiary, would
reasonably be expected to result in a Material Adverse Effect.
(aa) The
books, records and accounts of the Company and its subsidiaries accurately
and
fairly reflect, in reasonable detail, the transactions in, and dispositions
of,
the assets of, and the results of operations of, the Company and its
subsidiaries. The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management’s general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(bb) The
Company and the Significant Subsidiary are insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
in
all material respects as are customary in the businesses in which they are
engaged or propose to engage after giving effect to the transactions
contemplated hereby including but not limited to, real or personal property
owned or leased against theft, damage, destruction, act of vandalism and all
other risks customarily insured against. All policies of insurance and fidelity
or surety bonds insuring the Company or the Significant Subsidiary or the
Company’s or Significant Subsidiary’s respective businesses, assets, employees,
officers and directors are in full force and effect. The Company and each of
the
subsidiaries are in compliance with the terms of such policies and instruments
in all material respects. Neither the Company nor the Significant Subsidiary
has
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not reasonably be expected to have a Material Adverse Effect. Within
the
past twelve months, neither the Company nor the Significant Subsidiary has
been
denied any insurance coverage that it has sought or for which it has
applied.
(cc) None
of
the Company, any of its subsidiaries or any person acting on behalf of the
Company or any of its subsidiaries including, without limitation, any director,
officer, agent or employee of the Company or any of its subsidiaries has,
directly or indirectly, while acting on behalf of the Company or any of its
subsidiaries (i) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or (iv) made any other unlawful payment.
9
5. Representations
and Warranties of the Purchaser.
The
Purchaser represents and warrants to, and agrees with, the Company as
follows:
(a) The
Purchaser is aware that the Securities have not been and will not be registered
under the Securities Act and may not be offered or sold within the United States
or to “U.S. persons” (as defined in Regulation S under the Securities Act)
except in accordance with Rule 903 of Regulation S under the Securities Act
or
pursuant to an exemption from the registration requirements of the Securities
Act.
(b) The
Purchaser is an “accredited investor,” as such term is defined in Rule 501(a) of
Regulation D under the Securities Act.
(c) Neither
the Purchaser, nor any of the Purchaser’s Affiliates, nor any person acting on
the Purchaser’s or any Purchaser’s Affiliate’s behalf has engaged, or will
engage, in any form of “general solicitation or general advertising” (within the
meaning of Regulation D under the Securities Act) in connection with any offer
or sale of the Securities.
(d) The
Purchaser understands and acknowledges that (i) no public market exists for
any
of the Securities and that it is unlikely that a public market will ever exist
for the Securities, (ii) the Purchaser is purchasing the Securities for its
own
account, for investment and not with a view to, or for offer or sale in
connection with, any distribution thereof in violation of the Securities Act
or
other applicable securities laws, subject to any requirement of law that the
disposition of its property be at all times within its control and subject
to
its ability to resell such Securities pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption therefrom or
in a
transaction not subject thereto, and the Purchaser agrees to the legends and
transfer restrictions applicable to the Securities contained in the Indenture,
and (iii) the Purchaser has had the opportunity to ask questions of, and receive
answers and request additional information from, the Company and is aware that
it may be required to bear the economic risk of an investment in the
Securities.
(e) The
Purchaser is duly formed, validly existing and in good standing under the laws
of the jurisdiction in which it is organized with all requisite (i) power and
authority to execute, deliver and perform the Operative Documents to which
it is
a party, to make the representations and warranties specified herein and therein
and to consummate the transactions contemplated herein and (ii) right and power
to purchase the Securities.
(f) This
Purchase Agreement has been duly authorized, executed and delivered by the
Purchaser and no filing with, or authorization, approval, consent, license,
order registration, qualification or decree of, any governmental body, agency
or
court having jurisdiction over the Purchaser, other than those that have been
made or obtained, is necessary or required for the performance by the Purchaser
of its obligations under this Purchase Agreement or to consummate the
transactions contemplated herein.
10
(g) The
Purchaser is a “Qualified Purchaser” as such term is defined in Section 2(a)(51)
of the Investment Company Act.
6. Covenants
and Agreements of the Company.
The
Company agrees with the Purchaser as follows:
(a) During
the period from the date of this Agreement to the Closing Date, the Company
shall use its best efforts and take all action necessary or appropriate to
cause
its representations and warranties contained in Section
4
hereof
to be true as of the Closing Date, after giving effect to the transactions
contemplated by this Purchase Agreement, as if made on and as of the Closing
Date.
(b) The
Company will not, nor will it permit any of its Affiliates to, nor will it
permit any person acting on its or their behalf (other than the Purchaser)
to,
resell any Securities that have been acquired by any of them.
(c) The
Company will not, nor will it permit any of its Affiliates or any person acting
on its or their behalf to, engage in any “directed selling efforts” within the
meaning of Regulation S under the Securities Act with respect to the
Securities.
(d) The
Company will not, nor will it permit any of its Affiliates to, nor will it
permit any person acting on its or their behalf to, directly or indirectly,
make
offers or sales of any security, or solicit offers to buy any security, under
circumstances that would require the registration of any of the Securities
under
the Securities Act.
(e) The
Company will not, nor will it permit any of its Affiliates to, nor will it
permit any person acting on its or their behalf to, engage in any form of
“general solicitation or general advertising” (within the meaning of Regulation
D) in connection with any offer or sale of the any of the
Securities.
(f) So
long
as any of the Securities are outstanding, (i) the Securities shall not be listed
on a national securities exchange registered under Section 6 of the Exchange
Act
or quoted in a U.S. automated inter-dealer quotation system and (ii) the Company
shall not be an open-end investment company, unit investment trust or
face-amount certificate company that is, or is required to be, registered under
Section 8 of the Investment Company Act, and, the Securities shall otherwise
satisfy the eligibility requirements of Rule 144A(d)(3).
(g) The
Company shall furnish to (i) the holders, and subsequent holders, of the
Securities, (ii) Coredo Capital Management, LLC (at 000 0xx Xxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or such other address as designated by Coredo Capital
Management, LLC) and (iii) any beneficial owner of the Securities reasonably
identified to the Company (which identification may be made by either such
beneficial owner or by Coredo Capital Management, LLC), a duly completed and
executed certificate in the form attached hereto as Annex
D,
including the financial statements referenced in such Annex, which certificate
and financial statements shall be so furnished by the Company not later than
forty-five (45) days after the end of each of the first three fiscal quarters
of
each fiscal year of the Company and not later than ninety (90) days after the
end of each fiscal year of the Company.
11
(h) The
Company will, during any period in which it is not subject to and in compliance
with Section 13 or 15(d) of the Exchange Act, or it is not exempt from such
reporting requirements pursuant to and in compliance with Rule 12g3-2(b) under
the Exchange Act, provide to each holder of the Securities and to each
prospective purchaser (as designated by such holder) of the Securities, upon
the
request of such holder or prospective purchaser, any information required to
be
provided by Rule 144A(d)(4) under the Securities Act. If the Company is required
to register under the Exchange Act, such reports filed in compliance with Rule
12g3-2(b) shall be sufficient information as required above. This covenant
is
intended to be for the benefit of the Purchaser, the holders of the Securities,
and the prospective purchasers designated by the Purchaser and such holders,
from time to time, of the Securities.
(i) The
Company will not, until one hundred eighty (180) days following the Closing
Date, without the Purchaser’s prior written consent, offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, directly or
indirectly, (i) any Securities or other securities substantially similar to
the
Securities other than as contemplated by this Purchase Agreement or (ii) any
other securities convertible into, or exercisable or exchangeable for, any
Securities or other securities substantially similar to the Securities, unless
the Company, upon the request of the Purchaser, provides the Purchaser with
an
opinion of counsel (such counsel to have experience and sophistication in the
matters addressed in such opinion) addressed to the Purchaser stating that
any
such offer, sale, contract, option or other disposition will not result in
the
Securities being required to be registered under the Securities Act. For the
avoidance of doubt, the parties hereto agree that any securities issued by
the
Company with an interest rate, interest payment dates and maturity date that
are
different from the Securities would not be deemed to be substantially similar
to
the Securities.
(j) The
Company will use its best efforts to meet the requirements to qualify as a
REIT
under sections 856 through 860 of the Code, effective for the taxable year
ending December 31, 2007 (and each fiscal quarter of such year) and succeeding
taxable years for so long as the Company determines that it is in its best
interest to remain qualified as a REIT.
(k) The
Company will not identify any of the Indemnified Parties (as defined below)
in a
press release or any other public statement without the prior written consent
of
such Indemnified Party. For purposes of clarification, none of the Company's
financial statements, press releases or other statements may disclose the
identity of the Indemnified Parties, but may identify the Indenture Trustee;
provided,
however,
that
nothing to the contrary in this Agreement, in no event shall the Company be
precluded from filing any 1934 Act Reports or any other filings with the
Commission under the Securities Act, which the Company believes are reasonably
and legally necessary to be filed with the Commission.
7. Payment
of Expenses.
The
Company agrees to pay all costs and expenses incident to the performance of
the
obligations of the Company under this Purchase Agreement, whether or not the
transactions contemplated herein are consummated or this Purchase Agreement
is
terminated, including all costs and expenses incident to (i) the authorization,
issuance, sale and delivery of the Securities and any taxes payable in
connection therewith; (ii) the fees and expenses of qualifying the
Securities under the securities laws of the several jurisdictions as provided
in
Section
6(b);
(iii) the fees and expenses of the counsel, the accountants and any other
experts or advisors retained by the Company; (iv) the fees and all reasonable
expenses of the Indenture Trustee and any other trustee or paying agent
appointed under the Operative Documents, including the fees and disbursements
of
counsel for such trustees, which fees of the Indenture Trustee shall not exceed
a one time fee of $15,000; (v) $35,000 for the fees and expenses of DLA Piper
US
LLP, special counsel retained by Coredo Capital Management, LLC; (vi) a due
diligence fee equal to $14,5000; and (vii) a PORTAL eligibility fee of
$2,000.
12
If
the
sale of the Securities provided for in this Purchase Agreement is not
consummated because any condition set forth in Section
3
hereof
to be satisfied by either the Company is not satisfied, because this Purchase
Agreement is terminated pursuant to Section
9
or
because of any failure, refusal or inability on the part of the Company to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder other than by reason of a default by the Purchaser,
the
Company will reimburse the Purchaser upon demand for all reasonable
out-of-pocket expenses (including the fees and expenses of each of the
Purchaser’s counsel specified in the immediately preceding paragraph) that shall
have been incurred by the Purchaser in connection with the proposed purchase
and
sale of the Securities. The Company shall not in any event be liable to the
Purchaser for the loss of anticipated profits from the transactions contemplated
by this Purchase Agreement.
8. Indemnification.
(a) The
Company agrees to indemnify and hold harmless the Purchaser, the Purchaser’s
affiliates, Coredo Capital Management, LLC, and their respective affiliates
(collectively, the “Indemnified
Parties”)
each
person, if any, who controls any of the Indemnified Parties within the meaning
of the Securities Act or the Exchange Act, and the Indemnified Parties’
respective directors, officers, employees and agents against any losses, claims,
damages or liabilities, joint or several, to which the Indemnified Parties
may
become subject, under the Securities Act, the Exchange Act or other federal
or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out
of or are connected with the execution and delivery by the Company, and the
consummation thereby of the transactions contemplated by, this Purchase
Agreement or any other Operative Document. The Company agrees to reimburse
the
Indemnified Parties for any legal or other expenses reasonably incurred by
the
Indemnified Parties in connection with investigating or defending any such
loss,
claim, damage or liability or action arising out of or being connected with
the
execution and delivery by the Company, and the consummation by the Company
of
the transactions contemplated by, this Purchase Agreement or the other Operative
Documents. This indemnity agreement will be in addition to any liability that
any of the Company may otherwise have.
(b) Promptly
after receipt by an Indemnified Party under this Section 8
of
notice of the commencement of any action, such Indemnified Party will, if a
claim in respect thereof is to be made against the indemnifying party under
this
Section 8,
promptly notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve
the indemnifying party from liability under paragraph (a) above unless and
to
the extent that such failure results in the forfeiture by the indemnifying
party
of material rights and defenses and (ii) will not, in any event, relieve
the indemnifying party from any obligations to any Indemnified Party. The
Purchaser shall be entitled to appoint counsel to represent the Indemnified
Party in any action for which indemnification is sought. An indemnifying party
may participate at its own expense in the defense of any such action;
provided,
that
counsel to the indemnifying party shall not (except with the consent of the
Indemnified Party) also be counsel to the Indemnified Party. In no event shall
the indemnifying parties be liable for fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel
for
all Indemnified Parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, unless an Indemnified Party believes
that
its interests are not aligned with the interests of another Indemnified Party
or
that a conflict of interest might result. An indemnifying party will not,
without the prior written consent of the Indemnified Parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification may be sought hereunder (whether or not the Indemnified Parties
are actual or potential parties to such claim, action, suit or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of each Indemnified Party from all liability arising out of such claim, action,
suit or proceeding.
13
9. Termination;
Representations and Indemnities to Survive.
This
Purchase Agreement shall be subject to termination in the absolute discretion
of
the Purchaser, by notice given to the Company prior to delivery of and payment
for the Securities, if prior to such time (i) a downgrading shall have occurred
in the rating accorded the Company’s debt securities by any “nationally
recognized statistical rating organization,” as that term is used by the
Commission in Rule 15c3-1(c)(2)(vi)(F) under the Exchange Act, or such
organization shall have publicly announced that it has under surveillance or
review, with possible negative implications, its rating of the Company’s debt
securities, (ii) the Company shall be unable to sell and deliver to the
Purchaser at least $50,000,000 in stated liquidation value of Securities, (iii)
a suspension or material limitation in trading in securities generally shall
have occurred on the New York Stock Exchange, (iv) a suspension or material
limitation in trading in any of the Company’s securities shall have occurred on
the exchange or quotation system upon which the Company’ securities are traded,
if any, (v) a general moratorium on commercial business activities shall
have been declared either by federal, California or Maryland authorities or
(vi) there shall have occurred any outbreak or escalation of hostilities,
or declaration by the United States of a national emergency or war or other
calamity or crisis the effect of which on financial markets is such as to make
it, in the Purchaser’s judgment, impracticable or inadvisable to proceed with
the offering or delivery of the Securities. The respective agreements,
representations, warranties, indemnities and other statements of the Company
or
its officers and of the Purchaser set forth in or made pursuant to this Purchase
Agreement will remain in full force and effect, regardless of any investigation
made by or on behalf of the Purchaser or the Company or any of the their
respective officers, directors or controlling persons, and will survive delivery
of and payment for the Securities. The provisions of Sections
7
and
8
shall
survive the termination or cancellation of this Purchase Agreement.
10. Amendments.
This
Purchase Agreement may not be modified, amended, altered or supplemented, except
upon the execution and delivery of a written agreement by each of the parties
hereto.
11. Notices.
All
communications hereunder will be in writing and effective only on receipt,
and,
if sent to the Purchaser, will be mailed, delivered by hand or courier or sent
by facsimile and confirmed to the Purchaser, c/o Coredo Capital Management,
LLC,
000 0xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxx Xxxxx,
Facsimile: (000) 000-0000; or other address as the Purchaser shall
designate for such purpose in a notice to the Company; and if sent to the
Company, will be mailed, delivered by hand or courier or sent by facsimile
and
confirmed to it at Redwood Trust, Inc., Xxx Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxx
Xxxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxxx X. Xxxxxx, Facsimile: (000) 000-0000; with a copy to Mayer, Brown, Xxxx
& Maw, LLP, 00 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, Attention:
Xxxxxxxx X. Xxxxxxxxxx, Facsimile: (000) 000-0000.
14
12. Successors
and Assigns.
This
Purchase Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Nothing expressed
or mentioned in this Purchase Agreement is intended or shall be construed to
give any person other than the parties hereto and the affiliates, directors,
officers, employees, agents and controlling persons referred to in Section
8
hereof
and their successors, assigns, heirs and legal representatives, any right or
obligation hereunder. None of the rights or obligations of the Company under
this Purchase Agreement may be assigned, whether by operation of law or
otherwise, without the Purchaser’s prior written consent. The rights and
obligations of the Purchaser under this Purchase Agreement may be assigned
by
the Purchaser without the Company’s consent; provided that the assignee assumes
the obligations of the Purchaser under this Purchase Agreement.
13. Applicable
Law.
THIS
PURCHASE AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW (OTHER THAN SECTION 5-1401 OF THE GENERAL OBLIGATIONS
LAW).
14. Submission
To Jurisdiction.
ANY
LEGAL ACTION OR PROCEEDING BY OR AGAINST ANY PARTY HERETO OR WITH RESPECT TO
OR
ARISING OUT OF THIS PURCHASE AGREEMENT MAY BE BROUGHT IN OR REMOVED TO THE
COURTS OF THE STATE OF NEW YORK, IN AND FOR THE COUNTY OF NEW YORK, OR OF THE
UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH CASE
SITTING IN THE BOROUGH OF MANHATTAN). BY EXECUTION AND DELIVERY OF THIS PURCHASE
AGREEMENT, EACH PARTY ACCEPTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS (AND
COURTS OF APPEALS THEREFROM) FOR LEGAL PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS PURCHASE AGREEMENT.
15. Counterparts
and Facsimile.
This
Purchase Agreement may be executed by any one or more of the parties hereto
in
any number of counterparts, each of which shall be deemed to be an original,
but
all such counterparts shall together constitute one and the same instrument.
This Purchase Agreement may be executed by any one or more of the parties hereto
by facsimile.
[Signature
Page Follows]
15
IN
WITNESS WHEREOF, this Purchase Agreement has been entered into as of the date
first written above.
Redwood
Trust, Inc.
By:
/s/ Xxxxxx X.
Xxxxxx
Name:
Xxxxxx
X.
Xxxxxx
Title:
Vice
President, Chief Financial
Officer
and Secretary
Obsidian
CDO Warehouse, LLC
By:
Coredo Capital MAnagement, LLC
By:
/s/ Xxxx
Xxxxxxxxx
Name:
Xxxx Xxxxxxxxx
Title:
Managing Director
2
SCHEDULE 1
List
of Significant Subsidiaries
RWT
Holdings, Inc.
ANNEX
A-I
Pursuant
to Section 3(c) of the Purchase Agreement, Xxxxx Xxxxx Xxxx & Maw, LLP,
counsel for the Company, shall deliver an opinion to the effect
that:
(i) each
of
the Company and the Significant Subsidiary is validly existing as an entity
in
good standing under the laws of the jurisdiction in which it is incorporated;
each of the Company and the Significant Subsidiary has full power and authority
to own or lease its properties and to conduct its business as such business
is
currently conducted in all material respects; the Company has corporate power
and authority to (i) execute and deliver, and to perform its obligations under,
the Operative Documents to which it is a party and (iii) issue and perform
its
obligations under the Notes;
(ii) neither
the issue and sale of the Securities, nor the execution and delivery of and
compliance with the Operative Documents by the Company nor the consummation
of
the transactions contemplated thereby will constitute a breach or violation
of
the charter or by-laws or similar organizational documents of the
Company;
(iii) the
Indenture has been duly authorized, executed and delivered by the Company and,
assuming it has been duly authorized, executed and delivered by the Indenture
Trustee, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws affecting creditors’ rights
generally and to general principles of equity;
(iv) the
Securities have been duly authorized and executed by the Company and delivered
to the Indenture Trustee for authentication in accordance with the Indenture
and, when authenticated in accordance with the provisions of the Indenture
and
delivered to the Purchaser against payment therefor, will constitute legal,
valid and binding obligations of the Company entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and to general principles of equity;
(v) the
Company is not, and, following the issuance of the Securities and the
consummation of the transactions contemplated by the Operative Documents and
the
application of the proceeds therefrom, the Company will not be, an “investment
company” within the meaning of Section 3(a) of the Investment Company Act;
(vi) assuming
the truth and accuracy of the representations and warranties of the Purchaser
in
the Purchase Agreement, it is not necessary in connection with the offer, sale
and delivery of the Securities to register the same under the Securities Act
of
1933, as amended, under the circumstances contemplated in the Purchase
Agreement, or to require qualification of the Indenture under the Trust
Indenture Act of 1939, as amended;
(vii) the
Purchase Agreement has been duly authorized, executed and delivered by each
of
the Company; and
(viii) except
for filings, registrations or qualifications that may be required by applicable
securities laws, no authorization, approval, consent or order of, or filing,
registration or qualification with, any person (including, without limitation,
any court, governmental body or authority) is required under the laws of the
State of Maryland in connection with the transactions contemplated by the
Operative Documents;
A-I-1
ANNEX
A-II
Pursuant
to Section 3(b) of the Purchase Agreement, the Company shall provide an
Officers’ Certificate, to the effect that:
(i) all
of
the issued and outstanding equity interests of the Significant Subsidiary have
been duly authorized and validly issued, and are fully paid and nonassessable
and are owned of record and beneficially, directly or indirectly, by the
Company;
(ii) no
consent, approval, authorization or order of any court or Governmental Entity
is
required for the issue and sale of the Securities, the execution and delivery
of
and compliance with the Operative Documents by the Company or the consummation
of the transactions contemplated in the Operative Documents, except such
approvals (specified in such certificate) as have been obtained;
(iii) to
the
knowledge of such officer, there is no action, suit or proceeding before or
by
any government, governmental instrumentality, arbitrator or court, domestic
or
foreign, now pending or threatened against or affecting the Company or the
Significant Subsidiary that could adversely affect the consummation of the
transactions contemplated by the Operative Documents or could reasonably be
expected to have a Material Adverse Effect.
(iv) neither
the Company, nor the Significant Subsidiary is in breach or violation of, or
default under, with or without notice or lapse of time or both, it articles
of
incorporation or charter, by-laws or other governing documents; the execution,
delivery and performance of the Operative Documents and the consummation of
the
transactions contemplated by the Purchase Agreement and the Operative Documents
do not and will not (A) result in the creation or imposition of any material
lien, claim, charge, encumbrance or restriction upon any property or assets
of
the Company or the Significant Subsidiary, or (B) conflict with, constitute
a
material breach or violation of, or constitute a material default under, with
or
without notice or lapse of time or both, any of the terms, provisions or
conditions of (x) the articles of incorporation or charter, by-laws or other
governing documents of the Company or its Significant Subsidiary, or (y) to
the
best of our knowledge, any contract, indenture, mortgage, deed of trust, loan
or
credit agreement, note, lease, franchise, license or any other agreement or
instrument (collectively, “Agreements”) to which the Company or its Significant
Subsidiary is a party or by which any of them or any of their respective
properties may be bound, which is included as an exhibit to the Company’s 2006
10-K as a material Agreement or (z) any material order, decree, judgment,
franchise, license, permit, rule or regulation of any court, arbitrator,
government, or governmental agency or instrumentality, domestic or foreign,
known to us having jurisdiction over the Company or its Significant Subsidiary
or any of their respective properties which, in the case of each of (A) or
(B)
above, would reasonably be expected to have a Material Adverse
Effect.
(v) neither
the Company nor any of its “Affiliates” (as defined in Rule 501(b) of Regulation
D under the Securities Act (“Regulation D”)) has directly or indirectly, made
offers or sales of any security, or solicited offers to buy any security, under
circumstances that would require the registration of any of the Securities
being
issued pursuant to this transaction under the Securities Act, engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of any of the Securities,
or
engaged, nor will engage, in any “directed selling efforts” within the meaning
of Regulation S under the Securities Act with respect to the
Securities.
A-II-1
ANNEX
B
Pursuant
to Section 3(c) of the Purchase Agreement, Xxxxxxx and Xxxxxx LLP shall deliver
an opinion to the effect that
(v) for
U.S.
federal income tax purposes, the Securities should constitute indebtedness
of
the Company; and
(vi) beginning
with the Company’s initial taxable year ended December 31, 1994, the Company has
been organized in conformity with the requirements for qualification as a REIT
under the Code, and the Company’s actual method of operation through March 31,
2007 (the date of the most recent financial statements and management reports
reviewed by us) has enabled, and its proposed method of operation (as
represented in the attached Officer’s Certificate) should enable, the Company to
satisfy the requirements for qualification and taxation as a REIT.
In
rendering such opinions, such counsel may (A) state that its opinion is
limited to the federal laws of the United States and (B) rely as to
matters of fact, to the extent deemed proper, on certificates of responsible
officers of the Company and public officials.
Redwood
Trust, Inc. Officer’s Certificate
(Regarding
Tax Matters)
The
undersigned officers of Redwood
Trust, Inc.,
a
Maryland corporation (“Redwood
Trust”),
each
hereby certify the following information on behalf of Redwood Trust and its
affiliates (collectively, the “Company”),
after
due inquiry and with the knowledge that Xxxxxxx and Xxxxxx LLP has relied on
these certifications for the purpose of rendering its opinion (the “Xxxxxxx
Opinion”)
with
respect to the qualification of Redwood Trust as a “real estate investment
trust” under the provisions of the Internal Revenue Code of 1986, as amended
(the “Code”),1
and on
certain other federal income tax matters. To the extent that any of the
following representations relate to future events, such representations
constitute results that the Company anticipates achieving based on the business
plans and operational methods that the Company has followed and intends to
follow. Capitalized terms used but not defined herein shall have the meaning
assigned to them in the Xxxxxxx Opinion.
REIT
Related Matters:
1.I
am
familiar with the Company’s corporate and financial affairs, its methods of
operation, and its books and records and tax filings. I am also familiar with
the income, asset and stock ownership requirements applicable to real estate
investment trusts under Section 856 of the Code and the distribution
requirements applicable to real estate investment trusts under Section 857
of
the Code, that, in each case, must be satisfied in order for the
REIT2
to
maintain its classification as a real estate investment trust.
2.The
Company and each of its subsidiaries has at all times been and will continue
to
be operated in accordance with (i) its respective organizational documents
and
(ii) the laws of the jurisdiction under which it is organized.
3.The
Company adopted and has maintained December 31 as its year-end for all fiscal
and tax purposes.
4.The
REIT
made a timely election to be subject to tax as a real estate investment trust
under the Code commencing with its taxable year ended December 31, 1994 and
has
not revoked, or received any notice of termination, of such
election.
5.Redwood
Trust has no agreements regarding its stock other than: (i) the 2002
Redwood Trust Incentive Plan (as amended through May 2006, the “Stock
Option Plan”),
(ii) the Dividend Reinvestment and Stock Purchase Plan (as amended through
May 5, 2004, the “DRP”),
and
(iii) the 2002 Employee Stock Purchase Plan (the “ESPP”
and,
together with the Stock Option Plan and the DRP, the “Stock
Plans”),
and
there have been no changes to the Stock Plans or Redwood Trust’s
(i) Articles of Amendment and Restatement (the “Charter”),
(ii) Articles Supplementary, (iii) Bylaws (as modified through
November 2005), or (iv) Executive Deferred Compensation Plan (as modified
through November 2006), since their respective dates of adoption or the last
amendment noted herein. The copies of the corporate and shareholder minutes
of
Redwood Trust and its subsidiaries provided to you are true and complete copies
of such minutes through date hereof and there have been no modifications or
additions since such date.
_____________
1 All
section references to the Code set forth herein shall include references
to the
applicable Treasury regulations issued thereunder.
2 All
references to “the REIT” made herein are references solely to Redwood Trust,
Inc. and its qualified REIT subsidiaries, Sequoia Mortgage Funding Corporation
and Cypress Trust, Inc., whereas references to “the Company” are intended to
also include taxable REIT subsidiaries.
0.Xx
all
times since December 31, 1994, (i) beneficial ownership of the stock
of Redwood Trust has been held by 100 or more persons or entities, determined
without reference to any rules of attribution or look-through, (ii) Redwood
Trust has requested written statements of actual stock ownership from all
shareholders of record holding 5 percent or more of Redwood Trust’s stock
and has maintained its records as required under section 1.857-8 of the Treasury
regulations, and (iii) based on all information available to Redwood Trust
in its stock register, stock ownership records obtained from the Depository
Trust Corporation, 13D filings, written statements from Redwood Trust’s
shareholders of record, and other information available to it, no more than
50
percent in value of the capital stock of Redwood Trust is owned, directly or
indirectly, by five or fewer individuals determined using the applicable rules
of attribution as required under the Code.
7.The
beneficial ownership of Redwood Trust has been, and will continue to be,
evidenced by transferable shares. Redwood Trust has not, and will not, impose,
and it is not aware of, any transfer restrictions on its common stock, other
than restrictions (i) contained in Redwood Trust’s Charter,
(ii) imposed by applicable federal and state securities laws, and
(iii) imposed under the Stock Plans. The restrictions contained in the
Charter were adopted to enable Redwood Trust to comply with certain requirements
set forth in sections 856(a)(5), (a)(6), and (h) of the Code which are necessary
for its qualification as a real estate investment trust.
8.The
REIT
does not own more than 10 percent of the equity of, or control, directly or
indirectly, any corporation, association or other entity other than those listed
on Exhibit
A.
9.For
all
tax years commencing prior to 1998, less than 30 percent of the gross income
of
the REIT (as computed for tax purposes) in any taxable year was derived from
the
sale or other disposition of (i) stock or securities held for less than one
year, (ii) property (other than Foreclosure Property (as defined herein))
that was (a) held by the REIT primarily for sale to customers in the
ordinary course of the REIT’s trade or business or (b) properly included in
inventory of the REIT, and (iii) real property (including interests in
mortgages on real property) held for less than four years, other than property
compulsorily or involuntarily converted as a result of its destruction in whole
or in part, seizure, or requisition or condemnation or threat or imminence
thereof and property that was Foreclosure Property.
00.Xx
least
75 percent of the gross income derived by the REIT (as computed for tax
purposes) in any taxable year has consisted, and will consist, of
(i) interest on obligations secured by mortgages on real property or on
interests in real property, (ii) amounts derived from the rental of real
property, (iii) gain realized upon the sale or other disposition of real
property (including interests in mortgages on real property) that is not
property held by the REIT primarily for sale to customers in the ordinary course
of a business of being a dealer in, or making a market in, such property and
that is not included in inventory of the REIT, (iv) dividends or other
distributions on, and gain from the sale or other distribution of, shares (or
certificates of beneficial interests) in other real estate investment trusts,
(v) abatements and refunds of taxes on real property, (vi) income and
gain derived from real property (including interests in real property) and
any
personal property incident to such real property, acquired by the REIT through
a
default by the obligor on the lease of such property or on the indebtedness
secured by such property (“Foreclosure
Property”),
(vii) amounts (other than amounts the determination of which depends in
whole or in part on the income or profits of any person) received or accrued
as
consideration for entering into agreements to make loans secured by mortgages
on
real property or on interests in real property, or to purchase or lease real
property, (viii) gain from the sale or disposition of real property (or
interests in real property and interests in mortgages on real property) and
shares in other real estate investment trusts, which were treated as held for
sale or as inventory but that were not subjected to a prohibited transaction
tax, and (ix) qualified temporary investment income.
00.Xx
least
95 percent of the gross income derived by the REIT (as computed for tax
purposes) in any taxable year has consisted, and will consist, of (i) the
items of income described in Xxxxxxxxx 00 xxxxx, (xx) with respect to
tax years ending before 2005, payments to the REIT under any interest rate
swaps
or cap agreements entered into by the REIT to hedge any variable rate
indebtedness incurred or to be incurred by the REIT to acquire or carry real
estate assets (“Qualifying
Interest Rate Agreements”)
and any
gain from the termination or disposition of such agreements, (iii) gain
from the sale or other disposition of stock or securities that are not held
for
sale to customers or treated as inventory, and (iv) interest and dividends,
including interest and dividends from subsidiaries.
00.Xx
the
end of each calendar quarter, at least 75 percent of the value of the total
assets of the REIT (as determined under GAAP) has consisted of real property
(including interests in real property and interests in mortgages on real
property) and shares (or certificates of beneficial interest) in other real
estate investment trusts, cash and cash items (including receivables that arise
in the ordinary course of operations but excluding receivables purchased from
another person), and United States government securities.
00.Xx
the
end of each calendar quarter ending on or before December 31, 2000,
(a) not more than 25 percent of the value of the total assets of the REIT
(as determined under GAAP) consisted of securities (other than those securities
taken into account for purposes of Paragraph 12 above) and (b) the
REIT did not beneficially own any such securities of any one issuer
(i) having an aggregate value in excess of 5 percent of the value of the
total assets of the REIT or (ii) representing in excess of 10 percent of
the outstanding voting power of securities of such issuer.
00.Xx
the
end of each calendar quarter beginning on or after January 1, 2001,
(a) not more than 25 percent of the value of the total assets of the REIT
(as determined under GAAP) was attributable to securities (other than those
securities taken into account for purposes of Xxxxxxxxx 00 xxxxx),
(x) not more than 20 percent of the value of the REIT’s total assets has or
will be attributable to one or more taxable REIT subsidiaries and (c) other
than securities of a taxable REIT subsidiary or securities taken into account
for purposes of Paragraph 12 above, the REIT has not beneficially owned any
securities of any one issuer (i) having an aggregate value in excess of 5
percent of the value of the total assets of the REIT or (ii) representing
in excess of 10 percent of the outstanding voting power or value of securities
of such issuer. In particular, it is my understanding that the securities held
by the REIT in each of MKB CBO II, Ltd., Crest 2000-1, Ltd., Trainer
Xxxxxxx Republic CBO II, Limited and GSAMP 2006-RESID13
represent less than 10 percent of the total vote and value of such issuers’
securities.
________________
3 Those
entities listed on Exhibit
A
and in
#14 above together constitute the complete list of all entities in which
the
REIT owns equity securities.
15.The
REIT
has closely monitored, and will continue to closely monitor, its income,
including income from intercompany transactions, hedging transactions and sales
of mortgage related assets and securities, and the purchase, holding, and
disposition of its assets in order to comply with the representations set forth
in Paragraphs 9, 10, 11, 12, 13 and 14 hereof. Specifically, the REIT will
continue to monitor its earnings from interest rate caps and other hedging
instruments for purposes of determining whether such income constitutes income
from Qualifying Interest Rate Agreements and the proper characterization of
such
arrangements for purposes of the income and asset tests described above. If
it
is anticipated that the REIT may not be able to comply with such
representations, the REIT will take appropriate measures, including the
disposition of non-qualifying assets and/or assets generating non-qualifying
income, to comply with such representations.
16.The
REIT
has not earned, and does not expect to earn, income from mortgage servicing
rights with respect to mortgage loans beneficially owned by others.
17.The
REIT
has held 100 percent of the capital stock of Sequoia and Cypress, respectively,
at all times since their respective dates of formation and will hold 100 percent
of the capital stock of any other entity intended to be treated as a “qualified
REIT subsidiary” at all times during the period such entity is in existence.
Neither Sequoia nor Cypress has issued or will issue any securities or incur
any
indebtedness without first seeking the advice of tax counsel.
18.Effective
January 1, 2001, Redwood Trust and Holdings elected to treat Holdings as a
taxable REIT subsidiary of the REIT. Holdings does not own stock of any entities
other than (i) Sequoia Residential Funding, Inc. and Madrona LLC (collectively,
the “Holdings
Subsidiaries”)
and
(ii) certain of the Acacia subsidiaries. The Holdings Subsidiaries are
wholly-owned by Holdings.
19.The
REIT
has made a valid election to treat as a “taxable REIT subsidiary” (“TRS”) any
corporation (other than a qualified REIT subsidiary or another REIT) in which
it
owns in excess of 10% of the securities (by vote or value) and shall not consent
to the revocation of any such election. Part II of Exhibit
A
sets
forth a complete list of all “taxable REIT subsidiaries” of the REIT (each,
individually, a “TRS”).
Since
January 1, 2001, the aggregate value of the securities of all TRS held by
the REIT (including the value of any loans made by the REIT to any TRS) has
not
exceeded 20 percent of the REIT’s total assets (as determined under GAAP). The
aggregate value of the securities of Holdings held by the REIT prior to
January 1, 2001 did not exceed 5 percent of the REIT’s total assets (as
determined under GAAP).
00.Xx
TRS,
directly or indirectly, operates or manages, or will operate or manage, a
lodging or healthcare facility or provide to any person rights to any brand
name
under which a lodging facility or healthcare facility is operated. All
transactions between the REIT and each TRS have been conducted on an arm’s
length basis at terms believed to approximate market rate prices.
21.The
REIT
at all times has complied, and will continue to comply, with the record-keeping
requirements prescribed by the provisions of the Code applicable to REITs and,
specifically, sections 1.856-2(d)(3) and 1.857-8 of the Treasury
regulations.
22.With
respect to each tax year prior to 2001, the REIT distributed to its shareholders
with respect to each such taxable year amounts equal in the aggregate to at
least 95 percent of its “real estate investment trust taxable income”
(determined without regard to the deduction for dividends paid and by excluding
any net capital gain) plus at least 95 percent of the excess of any “net income
from foreclosure property” over the tax imposed by the Code on such net income,
if any, as such terms are defined in sections 857(b)(2) and 857(b)(4)(B),
respectively, of the Code, during the relevant taxable year or during the spill
over period immediately thereafter as described in section 858 of the Code.
With
respect to each tax year beginning after December 31, 2000, the REIT has
timely distributed to its shareholders amounts in the aggregate equal to at
least 90 percent of its real estate investment trust taxable
income.
23.For
each
tax year, the REIT has either (i) distributed (taking into consideration
distributions permitted under section 857(b)(9) of the Code) (a) 85 percent
of its ordinary income for the calendar year, (b) 95 percent of its capital
gain net income for that calendar year and (c) all amounts from earlier
years that are not treated as having been distributed under section 4981 of
the
Code, or (ii) paid all applicable excise taxes for such calendar
year.
24.Redwood
Trust will neither modify its existing dividend reinvestment plan to allow,
nor
adopt a dividend reinvestment plan that permits, its shareholders to reinvest
their cash distributions in shares of Redwood Trust at a purchase price less
than 95 percent of the fair market value of such shares on the distribution
date. Such discount shall be computed to include all brokerage charges until
advised otherwise by counsel. In addition, Redwood Trust generally only grants
“waiver discounts” at the same price as is generally available to other
participants in the plan unless there is a demonstrated cost savings to Redwood
Trust that justifies a different discount rate.
25.The
REIT
has at all times beneficially held, and will continue to beneficially hold,
its
assets, including its mortgage related assets and securities for investment
purposes and not as property held primarily for sale to customers in the
ordinary course of a trade or business of the REIT. At no time has the REIT
held
itself out to third parties as willing to make a market or act as a dealer
in
mortgage related assets or securities. The REIT has not originated any mortgage
loans and has acquired all of its mortgage related assets from third parties
after origination and funding thereof.
26.The
REIT
does not hold any mortgages with respect to which the interest is dependent
upon
appreciation or the income or profits of any person.
27.Redwood
Trust intends that the representations made by it herein regarding its mortgage
related assets and securities will be true with respect to any mortgage related
assets and securities acquired by the REIT after the date hereof.
28.The
information set forth in the quarterly management reports provided to you
regarding computation of the REIT’s asset and income tests and compliance with
its distribution requirements are true and correct as of the date
thereof.
29.The
Company has timely filed all tax returns required to be filed by it or its
affiliates. To my knowledge, neither the REIT, nor any of its affiliates, is
the
subject of any pending or threatened audit or investigation by the Internal
Revenue Service or other taxing authority.
Other
Matters:
1.I
have
reviewed and am familiar with the contents of the Xxxxxxx Opinion, the
Subordinated Indenture and the other Transaction Documents. I am aware of no
inaccuracy in the assumptions made in the Xxxxxxx Opinion (as set forth in
the
section labeled “Assumptions”).
2.I
am
familiar with the Company’s current financial condition and capital structure
and its business plan, including projected assets, income, expense and capital
structure for the foreseeable future.
3.Taking
into account the issuance of the Subordinated Notes, the Company currently
has a
net worth of approximately $900 million and a ratio of total debt to net worth
of approximately 13.01:1.
4.Although
the Transaction Documents do not impose a limit on the Company’s ability to
incur debt that is senior to the Subordinated Note or to incur additional
leverage generally, the Company’s business plan does not contemplate issuing
debt or incurring liabilities that would or could impair the Company’s ability
to pay accrued interest on the Subordinated Notes quarterly or repay principal
by maturity.
5.The
Company intends to treat the Subordinated Notes as debt for all tax, accounting
and other purposes.
IN
WITNESS WHEREOF, we have, on behalf of Redwood Trust, Inc., signed this
Officer’s Certificate effective as of the ____ day of May, 2007.
Redwood
Trust, Inc.
_________________________________
Xxxxxx
X.
Xxxxxx
Vice
President, Chief Financial Officer and Secretary
_________________________________
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Vice
President
Exhibit
A
(as
of March 31, 2007)
Part
I
Sequoia
Mortgage Funding Corporation (“Sequoia”)
Cypress
Trust, Inc. (“Cypress”)
Sequoia
Mortgage Trust 4
Sequoia
Mortgage Trust 5
Sequoia
Mortgage Trust 6
Sequoia
Mortgage Funding Trust 2003-A
Sequoia
Mortgage Funding Trust 2004-A
Sequoia
Heloc Trust 2004-1
Part
II
RWT
Holdings, Inc. (“Holdings”)
Sequoia
Residential Funding, Inc.
Madrona
LLC
Redwood
Asset Management, Inc. (“RAM”)
Redwood
Mortgage Funding, Inc. (“RMF”)
Cypress
TRS, Inc.
Acacia
CDO 4, Ltd.
Acacia
CDO 5, Ltd.
Acacia
CDO 6, Ltd.
Acacia
CDO 7, Ltd.
Acacia
CDO 8, Ltd.
Acacia
CDO 9, Ltd.
Acacia
CRE CDO 1, Ltd.
Acacia
CDO 10, Ltd.
Acacia
CDO 11, Ltd.
Acacia
Option ARM 1 CDO, Ltd.
Acacia
CRE CDO 2, Ltd.
Acacia
CDO 4, Inc.
Acacia
CDO 5, Inc.
Acacia
CDO 6, Inc.
Acacia
CDO 7, Inc.
Acacia
CDO 8, Inc.
Acacia
CDO 9, Inc.
Acacia
CRE CDO 1, Inc.
Acacia
CDO 10, Inc.
Acacia
CDO 11, Inc.
Acacia
Option ARM 1 CDO, Inc.
Acacia
CRE CDO 2, Inc.
Crest
G-Star 2001-2A, Ltd.
RESIX
Finance Limited
Millstone
III CDO, Ltd.
GSAA
2006-NIM8, Ltd.
ANNEX
C
Pursuant
to Section 3(d) of the Purchase Agreement, Xxxxxxxx, Xxxxxx & Finger, P.A.,
counsel for the Indenture Trustee, shall deliver an opinion to the effect that:
(i) Wilmington
Trust Company (“Wilmington Trust”) is duly incorporated and validly existing as
a Delaware banking corporation in good standing under the laws of the State
of
Delaware with trust powers and its principal place of business in the State
of
Delaware.
(ii) Wilmington
Trust has the power and authority to execute, deliver and perform its
obligations as Indenture Trustee under the Indenture and to authenticate and
deliver the Securities pursuant to the terms of the Indenture.
(iii) The
Indenture has been duly authorized, executed and delivered by Wilmington Trust
and to
the
extent that the Indenture is a legal, valid and binding obligation of Wilmington
Trust under the laws by which such agreement is expressly governed, the
Indenture constitutes the legal, valid and binding obligation of Wilmington
Trust, enforceable against Wilmington Trust, in accordance with the terms
thereof subject to (i) applicable bankruptcy, insolvency, moratorium,
reorganization, receivership, liquidation, fraudulent conveyance or transfer
and
similar laws relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied in a proceeding
in equity or at law) and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution..
(iv) Neither
the execution, delivery and performance by Wilmington Trust of the Indenture,
nor the consummation of any of the transactions by Wilmington Trust contemplated
thereby, including the authentication and delivery of the Securities by the
Indenture Trustee pursuant to the terms of the Indenture, (A) requires the
consent or approval of, the giving of notice to, the registration or filing
with, any governmental authority or agency under the laws of the State of
Delaware or the federal laws of the United States of America governing the
banking or trust powers of Wilmington Trust, or (B) is in violation of the
charter or bylaws of Wilmington Trust or of the laws of the State of Delaware
or
of the federal laws of the United States of America governing the banking or
trust powers of Wilmington Trust.
(v) The
Securities have been authenticated and delivered by Wilmington
Trust.
In
rendering such opinions, such counsel may (A) state that its opinion is limited
to the laws of the State of Delaware and the laws of the United States of
America, (B) rely as to matters of fact, to the extent deemed proper, on
certificates of responsible officers of Wilmington Trust, the Company and public
officials, and (C) make customary assumptions and exceptions as to
enforceability and other matters.
C-1
ANNEX
D
Officer’s
Financial Certificate
The
undersigned, the [Chairman/Vice Chairman/Chief Executive Officer/President/Vice
President/Chief Financial Officer/Treasurer/Assistant Treasurer], hereby
certifies pursuant to Section 6(g) of the Purchase Agreement, dated as of May
23, 2007, among Redwood Trust, Inc. (the “Company”) and Obsidian CDO Warehouse,
LLC, that, as of [date], [20__], the Company had the following ratios and
balances:
As
of
[Quarterly/Annual Financial Date], 20__
|
Senior
secured indebtedness for borrowed money (“Debt”)
|
$_____
|
|
Senior
unsecured Debt
|
$_____
|
|
Subordinated
Debt
|
$_____
|
|
Total
Debt
|
$
_____
|
|
Ratio
of (x) senior secured and unsecured Debt to (y) total Debt
|
_____%
|
[FOR
FISCAL YEAR END: Attached hereto are the audited consolidated financial
statements (including the balance sheet, income statement and statement of
cash
flows, and notes thereto, together with the report of the independent
accountants thereon) of the Company and its consolidated subsidiaries for the
three years ended _______, 20___].]
[FOR
FISCAL QUARTER END: Attached hereto are the unaudited consolidated and
consolidating financial statements (including the balance sheet and income
statement) of the Company and its consolidated subsidiaries for the fiscal
quarter ended [date], 20__.]
The
financial statements fairly present in all material respects, in accordance
with
U.S. generally accepted accounting principles (“GAAP”), the financial position
of the Company and its consolidated subsidiaries, and the results of operations
and changes in financial condition as of the date, and for the [quarter]
[annual]
period
ended [date],
20__,
and such financial statements have been prepared in accordance with GAAP
consistently applied throughout the period involved (expect as otherwise noted
therein).
There
has
been no monetary default with respect to any indebtedness owed by the Company
and/or its subsidiaries (other than those defaults cured within 30 days of
the
occurrence of the same).
IN
WITNESS WHEREOF, the undersigned has executed this Officer’s Financial
Certificate as of this _____ day of _____________, 20__.
Redwood
Trust, Inc.
By:
__________________________
Name:
Title:
Redwood
Trust, Inc.
Xxx
Xxxxxxxxx Xxxxx
Xxxxx
000
Xxxx
Xxxxxx, Xxxxxxxxxx 00000
Telephone:
(000) 000-0000
D-1
