PURCHASE AGREEMENT among REDWOOD TRUST, INC. REDWOOD CAPITAL TRUST I and BEAR, STEARNS & CO. INC. Dated as of December 12, 2006
Exhibit
1.2
Execution
Version
among
REDWOOD
TRUST, INC.
REDWOOD
CAPITAL TRUST I
and
BEAR,
▇▇▇▇▇▇▇ & CO. INC.
_______________
Dated
as
of December 12, 2006
________________
($75,000,000
Aggregate Liquidation Amount of Trust Preferred Securities)
THIS
PURCHASE AGREEMENT, dated as of December 12, 2006 (this “Purchase
Agreement”),
is
entered into among Redwood Trust, Inc., a Maryland corporation (the
“Company”),
and
Redwood Capital Trust I, a Delaware statutory trust (the “Trust”,
and
together with the Company, the “Sellers”),
and
Bear, ▇▇▇▇▇▇▇ & Co. Inc. or its assignee (the “Purchaser”).
WITNESSETH:
WHEREAS,
the Sellers propose to issue and sell Seventy-Five Thousand (75,000)
Floating Rate Preferred Securities of the Trust, having a stated liquidation
amount of $1,000 per security, bearing a variable rate, reset quarterly, equal
to LIBOR (as defined in the Indenture (as defined below)) plus 2.25% per
annum (the
“Preferred
Securities”);
WHEREAS,
the proceeds from the sale of the Preferred Securities will be combined with
proceeds from the sale by the Trust to the Company of its common securities
(the
“Common
Securities”),
and
will be used by the Trust to purchase Seventy-Seven Million Three
Hundred Twenty-Five Thousand Dollars ($77,325,000) in principal amount of
the unsecured junior subordinated notes of the Company (the “Junior
Subordinated Notes”);
WHEREAS,
the Preferred Securities and the Common Securities for the Trust will be issued
pursuant to the Amended and Restated Trust Agreement (the “Trust
Agreement”),
dated
as of the Closing Date, among the Company, as depositor, The Bank of New York
Trust Company, National Association, a national banking association, as property
trustee (in such capacity, the “Property
Trustee”),
The
Bank of New York (Delaware), a national banking association, as Delaware trustee
(in such capacity, the “Delaware
Trustee”),
the
Administrative Trustees named therein (in such capacities, the “Administrative
Trustees”)
and
the holders from time to time of undivided beneficial interests in the assets
of
the Trust; and
WHEREAS,
the Junior Subordinated Notes will be issued pursuant to a Junior Subordinated
Indenture, dated as of the Closing Date (the “Indenture”),
between the Company and The Bank of New York Trust Company, National
Association, a national banking association, as indenture 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.
The
Preferred Securities, the Common Securities and the Junior Subordinated Notes
are collectively referred to herein as the “Securities.”
This
Purchase Agreement, the Indenture, the Trust Agreement 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 Preferred Securities.
(a) The
Sellers agree to sell to the Purchaser, and the Purchaser agrees to purchase
from the Sellers the Preferred Securities for an aggregate amount (the
“Purchase
Price”)
equal
to Seventy-Five Million Dollars ($75,000,000). The Purchaser shall be
responsible for the rating agency costs and expenses. The Sellers shall use
the
Purchase Price, together with the proceeds from the sale of the Common
Securities, to purchase the Junior Subordinated Notes.
(b) Delivery
or transfer of, and payment for, the Preferred Securities shall be made at
11:00
A.M. New York time, on December 12, 2006 or such later date (not later than
January 10, 2007) as the parties may designate (such date and time of delivery
and payment for the Preferred Securities being herein called the “Closing
Date”).
The
Preferred Securities shall be transferred and delivered to the Purchaser against
the payment of the Purchase Price to the Sellers 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 Preferred 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 and the Trust agree to have the
Preferred Securities available for inspection and checking by the Purchaser
in
New York, New York, not later than 2:00 P.M. New York time on the business
day
prior to the Closing Date. The closing for the purchase and sale of the
Preferred Securities shall occur at the offices of ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman
& ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 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 Preferred Securities.
(b) Reserved.
(c) ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ & Maw LLP, counsel for the Company and the Trust (the
“Company
Counsel”),
shall
have delivered an opinion, dated the Closing Date, addressed to the Purchaser
and The Bank of New York Trust Company, National Association, 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 the Trust 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).
2
(d) The
Purchaser shall have been furnished the opinion of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ LLP,
dated
the Closing Date, addressed to the Purchaser and The Bank of New York Trust
Company, National Association, in substantially the form set out in Annex
B
hereto.
(e) The
Purchaser shall have received the opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger,
P.A., special Delaware counsel for the Delaware Trustee, dated the Closing
Date,
addressed to the Purchaser, The Bank of New York Trust Company, National
Association, the Delaware Trustee and the Company, in substantially the form
set
out in Annex
C
hereto.
(f) The
Purchaser shall have received the opinion of Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ LLP, special
counsel for the Property Trustee and the Indenture Trustee, dated the Closing
Date, addressed to the Purchaser, in substantially the form set out in
Annex
D
hereto.
(g) The
Purchaser shall have received the opinion of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger,
P.A., special Delaware counsel for the Delaware Trustee, dated the Closing
Date,
addressed to the Purchaser and The Bank of New York Trust Company, National
Association, in substantially the form set out in Annex
E
hereto.
(h) 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,
and the Trust shall have furnished to the Purchaser a certificate of the Trust,
signed by an Administrative Trustee of the Trust, in each case dated the Closing
Date, and, in the case of the Company, as to (i) and (ii) below and, in the
case
of the Trust, as to (i) 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 and the Trust have complied with all the agreements and
satisfied all the conditions on either of their 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”).
(i) 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
Preferred Securities.
3
(j) Prior
to
the Closing Date, the Company and the Trust 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 and the Trust in writing or by telephone or facsimile confirmed
in
writing.
Each
certificate signed by any trustee of the Trust or 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 Trust and/or the Company,
as the case may be, and not by such trustee or officer in any individual
capacity.
4. Representations
and Warranties of the Company and the Trust.
The
Company and the Trust jointly and severally represent and warrant to, and agree
with the Purchaser, as follows:
(a) Neither
the Company nor the Trust, nor any of their “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 or their
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 the Trust, nor any of their Affiliates, nor any person acting
on
its or their 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)”).
4
(d) Neither
the Company nor the Trust, nor any of their Affiliates, nor any person acting
on
its or their 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) Neither
the Company nor the Trust is, 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) Neither
the Company nor the Trust has paid or agreed to pay to any person any
compensation for soliciting another to purchase any of the Securities, except
for the preferred securities commission and/or the sales commission of three
percent (3%) the Company has agreed to pay to Taberna Securities, LLC (or to
the
Company’s introducing agent on behalf of Taberna Securities, LLC) pursuant to
the letter agreement between the Company and Taberna Securities, LLC, dated
November 21, 2006.
(g) The
Trust
has been duly created and is validly existing in good standing as a statutory
trust under the Delaware Statutory Trust Act, 12 Del. C. § 3801,
et
seq.
(the
“Statutory Trust
Act”)
with
all requisite power and authority to own property and to conduct the business
it
transacts and proposes to transact and to enter into and perform its obligations
under the Operative Documents to which it is a party. The Trust is duly
qualified to transact business as a foreign entity and is in good standing
in
each jurisdiction in which such qualification is necessary, except where the
failure to so qualify or be in good standing would not 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”).
The
Trust is not a party to or otherwise bound by any agreement other than the
Operative Documents.
(h) The
Trust
Agreement has been duly authorized by the Company and, on the Closing Date
specified in Section
2(b)
hereof,
will have been duly executed and delivered by the Company and the Administrative
Trustees of the Trust, and, assuming due authorization, execution and delivery
by the Property Trustee and the Delaware Trustee, will be a legal, valid and
binding obligation of the Company and the Administrative Trustees, enforceable
against them in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights generally and to general
principles of equity. Each of the Administrative Trustees of the Trust is an
employee of the Company and has been duly authorized by the Company to execute
and deliver the Trust Agreement.
(i) 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.
5
(j) The
Preferred Securities and the Common Securities have been duly authorized by
the
Trust and, when issued and delivered against payment therefor on the Closing
Date in accordance with this Purchase Agreement, in the case of the Preferred
Securities, and in accordance with the Common Securities Subscription Agreement,
in the case of the Common Securities, will be validly issued, fully paid and
non-assessable and will represent undivided beneficial interests in the assets
of the Trust entitled to the benefits of the Trust Agreement, enforceable
against the Trust in accordance with their terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally
and to general principles of equity. The issuance of the Securities is not
subject to any preemptive or other similar rights. On the Closing Date, all
of
the issued and outstanding Common Securities will be directly owned by the
Company free and clear of any pledge, security interest, claim, lien or other
encumbrance of any kind (each, a “Lien”).
(k) The
Junior Subordinated Notes 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
Trust against payment therefor in accordance with that certain Junior
Subordinated Note Purchase Agreement of even date herewith between the Company
and the Trust (the “Junior
Subordinated Note Purchase Agreement”),
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.
(l) This
Purchase Agreement has been duly authorized, executed and delivered by the
Company and the Trust.
(m) Neither
the issue and sale of the Common Securities, the Preferred Securities or the
Junior Subordinated Notes, nor the purchase of the Junior Subordinated Notes
by
the Trust, nor the execution and delivery of and compliance with the Operative
Documents by the Company or the Trust, nor the consummation of the transactions
contemplated herein or therein, (i) will conflict with or constitute a violation
or breach of the Trust Agreement or 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 Trust or 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 Lien upon any property or assets of the Trust, 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
Trust, 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 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 Trust or the Company or any of its subsidiaries prior
to its scheduled maturity.
6
(n) 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.
(o) 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.
(p) Each
of
the Trust, 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 Trust, 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.
7
(q) 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.
(r) 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.
(s) 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
or the Trust after due inquiry, threatened against or affecting the Trust or
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 Trust or 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.
(t) 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.
(u) 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, 2005 (the “Financial
Statements”)
and
the interim unaudited consolidated financial statements of the Company and
its
consolidated subsidiaries for the quarter ended September 30, 2006 (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).
8
(v) None
of
the Trust, 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 Trust,
the Company and/or its subsidiaries since the date of the most recent balance
sheet included in such Financial Statements.
(w) 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.
(x) 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
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, except as would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
9
(y) No
labor
dispute with the employees of the Trust, the Company or the Significant
Subsidiary exists or, to the knowledge of the executive officers of the Trust
or
the Company, is imminent, except those which would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(z) 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
Trust
or the Company of their respective obligations under the Operative Documents,
as
applicable, or the consummation by the Trust and the Company of the transactions
contemplated by the Operative Documents.
(aa) Reserved.
(bb) Reserved.
(cc) 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, 2006 and succeeding taxable years for so long as the
Company determines that it is in its best interest to remain qualified as a
REIT.
(dd) 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.
(ee) Interest
payable by the Company on the Junior Subordinated Notes is deductible by the
Company, in whole or in part, for U.S. federal income tax purposes, and the
Trust is not, or will not be within ninety (90) days of the date hereof, subject
to more than a de
minimis
amount
of other taxes, duties or other governmental charges. To the knowledge of the
Company, there are no rulemaking 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.
10
(ff) 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.
(gg) 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.
(hh) 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.
5. Representations
and Warranties of the Purchaser.
The
Purchaser represents and warrants to, and agrees with, the Company and the
Trust
as follows:
11
(a) The
Purchaser is aware that the Preferred 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 Preferred Securities.
(d) The
Purchaser understands and acknowledges that (i) no public market exists for
any
of the Preferred Securities and that it is unlikely that a public market will
ever exist for the Securities, (ii) the Purchaser is purchasing the Preferred
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 Preferred 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 Preferred
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 Preferred 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 Preferred 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.
(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 and the Trust.
The
Company and the Trust jointly and severally agree with the Purchaser as
follows:
12
(a) During
the period from the date of this Agreement to the Closing Date, the Company
and
the Trust shall use their best efforts and take all action necessary or
appropriate to cause their 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) Reserved.
(c) Neither
the Company nor the Trust will, nor will either of them permit any of its
Affiliates to, nor will either of them 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.
(d) Neither
the Company nor the Trust will, nor will either of them permit any of their
Affiliates or any person acting on their behalf to, engage in any “directed
selling efforts” within the meaning of Regulation S under the Securities Act
with respect to the Securities.
(e) Neither
the Company nor the Trust will, nor will either of them permit any of their
Affiliates or any person acting on 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.
(f) Neither
the Company nor the Trust will, nor will either of them permit any of its
Affiliates or any person acting on 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.
(g) 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) neither
the
Company nor the Trust shall 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).
(h) Each
of
the Company and the Trust shall furnish to (i) the holders, and subsequent
holders, of the Preferred Securities, (ii) Taberna Capital Management, LLC
(at
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or such other address
as
designated by Taberna Capital Management, LLC) and (iii) any beneficial owner
of
the Securities reasonably identified to the Company and the Trust (which
identification may be made by either such beneficial owner or by Taberna Capital
Management, LLC), a duly completed and executed certificate in the form attached
hereto as Annex
F,
including the financial statements referenced in such Annex, which certificate
and financial statements shall be so furnished by the Company and the Trust
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.
(i) Each
of
the Company and the Trust 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 and the Trust are 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.
13
(j) Neither
the Company nor the Trust will, 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 Preferred Securities or other securities substantially
similar to the Preferred Securities other than as contemplated by this Purchase
Agreement or (ii) any other securities convertible into, or exercisable or
exchangeable for, any Preferred Securities or other securities substantially
similar to the Preferred 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 Preferred Securities being required
to be registered under the Securities Act. For the avoidance of doubt, the
parties hereto agree that any preferred securities issued by a statutory trust
other than the Trust with an interest rate, interest payment dates and maturity
date that is different from the Preferred Securities would not be deemed to
be
substantially similar to the Preferred Securities.
(k) 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, 2006 (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.
(l) Neither
the Company nor the Trust will 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 or Trust's financial statements, press releases or other
statements may disclose the identity of the Indemnified Parties, but may
identify the 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.
(m) The
Purchaser is granted the right under the Indenture and the Trust Agreement
to
request the substitution of new notes for all or a portion of the Junior
Subordinated Notes held by the Trust. The Trust is required under the terms
of
the Indenture and the Trust Agreement to accept such newly issued notes (the
“Replacement
Notes”)
from
the Company and surrender a like amount of Junior Subordinated Notes to the
Company. The Replacement Notes shall bear terms identical to the Junior
Subordinated Notes with the sole exception of interest payment dates (and
corresponding redemption date and maturity date), which will be specified by
the
Purchaser. In no event will the interest payment dates (and corresponding
redemption date and maturity date) on the Replacement Notes vary by more than
sixty (60) calendar days from the original interest payment dates (and
corresponding redemption date and maturity date) in effect on the Closing Date
under the Junior Subordinated Notes. Each of the Company and the Trust
acknowledges and agrees that, to the extent of the principal amount of the
Replacement Notes issued to the Trust under the Indenture, the Purchaser (and
each successor to Purchaser’s interest in the Preferred Securities) will require
the Trust to issue a new series of Preferred Securities having a principal
amount related to the principal amount of the Replacement Notes (the
“Replacement
Securities”)
to
designated holders of Preferred Securities, provided that any such Replacement
Securities, and any distributions from the Trust to the holders of Replacement
Securities, must relate solely to the Trust’s interest in the Replacement Notes
and in no event will the Preferred Securities other than the Replacement
Securities share in the returns from any Replacement Notes. The Replacement
Securities shall have payment dates (and corresponding redemption date and
maturity date) that relate to the Replacement Notes. Each of the Company and
the
Trust agrees to cooperate with all reasonable requests of the Purchaser in
connection with any of the foregoing, provided that no action requested of
the
Company or the Trust in connection with such cooperation shall materially
increase the obligations or materially decrease the rights of the Company
pursuant to such documents.
14
7. Payment
of Expenses.
The
Company, as depositor of the Trust, agrees to pay all costs and expenses
incident to the performance of the obligations of the Company and the Trust
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 Preferred Securities and any taxes payable in connection
therewith; (ii) the fees and expenses of qualifying the Preferred
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 or the Trust; (iv) the fees and
all
reasonable expenses of the Property Trustee, the Delaware Trustee, 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 shall not exceed a $2,000 acceptance fee, $3,500 for the fees and
expenses of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A., special Delaware counsel
retained by the Delaware Trustee in connection with the Closing, and
$4,000 in
administrative fees annually; and (v) $50,000 for the fees and expenses of
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman & ▇▇▇▇▇▇▇ LLP, special counsel retained by Taberna
Capital Management, LLC.
If
the
sale of the Preferred 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 or the Trust 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 or
the
Trust 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 subparagraphs (iv) and (v) of the
immediately preceding paragraph) that shall have been incurred by the Purchaser
in connection with the proposed purchase and sale of the Preferred 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.
15
8. Indemnification.
(a) The
Sellers agree, jointly and severally, to indemnify and hold harmless the
Purchaser, the Purchaser’s affiliates, Taberna Capital Management, LLC, Taberna
Securities, 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 Sellers, and the
consummation thereby of the transactions contemplated by, this Purchase
Agreement or any other Operative Document. Sellers agree, jointly and severally,
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 Sellers, and the
consummation by the Sellers 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 Sellers may otherwise
have.
(b) The
Company agrees to indemnify the Trust against all loss, liability, claim, damage
and expense whatsoever due from the Trust under paragraph (a)
above.
(c) 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. 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.
16
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 and the Trust prior to delivery
of
and payment for the Preferred Securities, if prior to such time (i) a
downgrading shall have occurred in the rating accorded the Company’s debt
securities or preferred stock 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 or preferred
stock, (ii) the Trust shall be unable to sell and deliver to the Purchaser
at
least $75,000,000 in stated liquidation value of Preferred 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 Preferred Securities. The respective agreements,
representations, warranties, indemnities and other statements of the Company
and
the Trust or their respective officers or trustees 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, the Company or the Trust or any of the their respective officers,
directors, trustees or controlling persons, and will survive delivery of and
payment for the Preferred 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 Taberna Capital Management,
LLC,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇
▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇; with a copy to ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ Raysman
& ▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇
▇▇▇▇▇▇, Esq., Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ or other address as the Purchaser shall
designate for such purpose in a notice to the Company and the Trust; and if
sent
to the Company or the Trust, will be mailed, delivered by hand or courier or
sent by facsimile and confirmed to it at Redwood Trust, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇.
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 or the
Trust 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 or the Trust’s consent; provided that the
assignee assumes the obligations of the Purchaser under this Purchase
Agreement.
17
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]
18
IN
WITNESS WHEREOF, this Purchase Agreement has been entered into as of the date
first written above.
|
Redwood
Trust, Inc.
|
|||
|
By:
|
|
||
|
Name:
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
||
|
Title:
|
Chief
Financial Officer,
Treasurer,Vice
President and Secretary
|
||
|
Redwood
Capital Trust I
|
||||
|
By:
|
Redwood
Trust, Inc.,
as Depositor
|
|||
|
By:
|
|
|||
|
Name:
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
|
|||
|
Title:
|
Chief
Financial Officer, Treasurer,
Vice
President and Secretary
|
|||
|
Bear,
▇▇▇▇▇▇▇ & Co. Inc.
|
||
| |
|
|
| By: | _____________________________________ | |
|
Name:
|
||
| Title: | ||
SCHEDULE
1
List
of Significant Subsidiaries
RWT
Holdings, Inc.
ANNEX
A-I
Pursuant
to Section 3(c) of the Purchase Agreement, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ & 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 Common Securities, the Preferred Securities or the
Junior Subordinated Notes, nor the purchase by the Trust of the Junior
Subordinated Notes, nor the execution and delivery of and compliance with the
Operative Documents by the Company or the Trust nor the consummation of the
transactions contemplated thereby will constitute a breach or violation of
the
Trust Agreement or the charter or by-laws or similar organizational documents
of
the Company;
(iii) the
Trust
Agreement has been duly authorized, executed and delivered by the Company and
duly executed and delivered by the Administrative Trustees;
(iv) 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;
(v) the
Junior Subordinated Notes 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 Trust 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;
(vi) the
Trust
is not, and, following the issuance of the Preferred Securities and the
consummation of the transactions contemplated by the Operative Documents and
the
application of the proceeds therefrom, the Trust will not be, an “investment
company” within the meaning of Section 3(a) of the Investment Company Act;
A-I-1
(vii) 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 Common Securities, the Preferred Securities and the Junior
Subordinated Notes to register the same under the Securities Act of 1933, as
amended, under the circumstances contemplated in the Purchase Agreement and
the
Trust Agreement, or to require qualification of the Indenture under the Trust
Indenture Act of 1939, as amended;
(viii) the
Purchase Agreement has been duly authorized, executed and delivered by each
of
the Company and the Trust; and
(ix) 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-2
ANNEX
A-II
Pursuant
to Section 3(c) 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, and the issuance of the Preferred Securities and the Common Securities
is not subject to any contractual preemptive rights known to such
officer;
(ii) no
consent, approval, authorization or order of any court or Governmental Entity
is
required for the issue and sale of the Common Securities, the Preferred
Securities or the Junior Subordinated Notes, the purchase by the Trust of the
Junior Subordinated Notes, the execution and delivery of and compliance with
the
Operative Documents by the Company or the Trust 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 Trust or 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.
A-II-1
(iv) neither
the Company, the Trust, 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
(including, without limitation, the Trust Agreement); 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 2005
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 Junior
Subordinated Notes, the Preferred Securities or the Common 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-2
ANNEX
B
Pursuant
to Section 3(d) of the Purchase Agreement, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ LLP shall deliver
an opinion to the effect that:
(i) the
Trust
will be classified for U.S. federal income tax purposes as a grantor trust
or
other disregarded entity and not as an association or a publicly traded
partnership taxable as a corporation;
(ii) for
U.S.
federal income tax purposes, the Junior Subordinated Notes should constitute
indebtedness of the Company; and
(iii) 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 September
30, 2006 (the date of the most recent unaudited 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.
B-1
REDWOOD
TRUST, INC.
REIT
BACK-UP OFFICER’S CERTIFICATE
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 ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ LLP has relied on
these certifications for the purpose of rendering its opinion (the “▇▇▇▇▇▇▇
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 ▇▇▇▇▇▇▇ 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 promulgated 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
include taxable REIT subsidiaries as well.
6.
At
all
times since December 31, 1994, (i) beneficial ownership of the stock
of Redwood Trust has been, and will continue to be, 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 1 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 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.
10.
At
least
75 percent of the gross income derived by the REIT 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.
11.
At
least
95 percent of the gross income derived by the REIT in any taxable year has
consisted, and will consist, of (i) the items of income described in
▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, (▇▇) 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.
12.
At
the
end of each calendar quarter, at least 75 percent of the total value of the
assets of the REIT has consisted, and will consist, 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.
13.
At
the
end of each calendar quarter ending on or before December 31, 2000,
(a) not more than 25 percent of the total value of the assets of the REIT
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.
14.
At
the
end of each calendar quarter beginning on or after January 1, 2001,
(a) not more than 25 percent of the total value of the assets of the REIT
has or will be attributable to securities (other than those securities taken
into account for purposes of ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇), (▇) 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 Duke Funding I, Ltd., MKB CBO II, Ltd., Crest 2000-1, Ltd., and
Trainer ▇▇▇▇▇▇▇ Republic CBO II, Limited3
represent less than 10 percent of the total vote and value of such issuers’
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 total 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,
and
will not, exceed 20 percent of the total value of the REIT’s assets. The total
value of the securities of Holdings held by the REIT prior to January 1,
2001 did not exceed 5 percent of the value of the REIT’s total
assets.
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.
20.
No
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.
For
tax years beginning after December 31, 2000, the REIT has and will continue
to timely distribute to its shareholders amounts in the aggregate equal to
at
least 90 percent of such 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 ▇▇▇▇▇▇▇ Opinion, the
Subordinated Indenture and the other Transaction Documents. I am aware of no
inaccuracy in the assumptions made in the ▇▇▇▇▇▇▇ 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 $1.15 billion and a ratio of total debt to net worth
of approximately 10.2:1.
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
Certificate as of the ____ day of December, 2006.
|
Redwood
Trust, Inc.
|
|
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| Chief Financial Officer | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
| Vice President |
Exhibit
A
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”)
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
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.
Crest
G-Star 2001-2, Ltd.
RESIX
Finance Limited
Millstone
III CDO, Ltd.
ANNEX
C
Pursuant
to Section 3(e) of the Purchase Agreement, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A.,
special Delaware counsel for the Delaware Trustee, shall deliver an opinion
to
the effect that:
(i) the
Trust
has been duly created and is validly existing in good standing as a statutory
trust under the Delaware Statutory Trust Act, and all filings required under
the
laws of the State of Delaware with respect to the creation and valid existence
of the Trust as a statutory trust have been made;
(ii) under
the
Delaware Statutory Trust Act and the Trust Agreement, the Trust has the trust
power and authority (A) to own property and conduct its business, all as
described in the Trust Agreement, (B) to execute and deliver, and to perform
its
obligations under, each of the Purchase Agreement, the Common Securities
Subscription Agreement, the Junior Subordinated Note Purchase Agreement and
the
Preferred Securities and the Common Securities and (C) to purchase and hold
the
Junior Subordinated Notes;
(iii) under
the
Delaware Statutory Trust Act, the certificate attached to the Trust Agreement
as
Exhibit C
is an
appropriate form of certificate to evidence ownership of the Preferred
Securities; the Preferred Securities have been duly authorized by the Trust
Agreement and, when issued and delivered against payment of the consideration
as
set forth in the Purchase Agreement, the Preferred Securities will be validly
issued and (subject to the qualifications set forth in this paragraph) fully
paid and nonassessable and will represent undivided beneficial interests in
the
assets of the Trust; the holders of the Preferred Securities will be entitled
to
the benefits of the Trust Agreement and, as beneficial owners of the Trust,
will
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware; and such counsel may note that the
holders of the Preferred Securities may be obligated, pursuant to the Trust
Agreement, to (A) provide indemnity and/or security in connection with and
pay
taxes or governmental charges arising from transfers or exchanges of Preferred
Securities certificates and the issuance of replacement Preferred Securities
certificates and (B) provide security or indemnity in connection with requests
of or directions to the Property Trustee to exercise its rights and remedies
under the Trust Agreement;
(iv) the
Common Securities have been duly authorized by the Trust Agreement and, when
issued and delivered by the Trust to the Company against payment therefor as
described in the Trust Agreement and the Common Securities Subscription
Agreement, will be validly issued and fully paid and will represent undivided
beneficial interests in the assets of the Trust entitled to the benefits of
the
Trust Agreement;
(v) under
the
Delaware Statutory Trust Act and the Trust Agreement, the issuance of the
Preferred Securities and the Common Securities is not subject to preemptive
or
other similar rights;
(vi) under
the
Delaware Statutory Trust Act and the Trust Agreement, the execution and delivery
by the Trust of the Purchase Agreement, the Common Securities Subscription
Agreement and the Junior Subordinated Note Purchase Agreement, and the
performance by the Trust of its obligations thereunder, have been duly
authorized by all necessary trust action on the part of the Trust;
C-1
(vii) the
Trust
Agreement constitutes a legal, valid and binding obligation of the Company
and
the Trustees, and is enforceable against the Company and the Trustees, in
accordance with its terms, subject, as to enforcement, to the effect upon the
Trust Agreement of (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance or transfer and other 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;
(viii) the
issuance and sale by the Trust of the Preferred Securities and the Common
Securities, the purchase by the Trust of the Junior Subordinated Notes, the
execution, delivery and performance by the Trust of the Purchase Agreement,
the
Common Securities Subscription Agreement and the Junior Subordinated Note
Purchase Agreement, the consummation by the Trust of the transactions
contemplated by the Purchase Agreement and compliance by the Trust with its
obligations thereunder do not violate (i) any of the provisions of the
Certificate of Trust or the Amended and Restated Trust Agreement or (ii) any
applicable Delaware law, rule or regulation;
(ix) no
filing
with, or authorization, approval, consent, license, order, registration,
qualification or decree of, any Delaware court or Delaware Governmental Entity
or Delaware agency is necessary or required solely in connection with the
issuance and sale by the Trust of the Common Securities or the Preferred
Securities, the purchase by the Trust of the Junior Subordinated Notes, the
execution, delivery and performance by the Trust of the Purchase Agreement,
the
Common Securities Subscription Agreement and the Junior Subordinated Note
Purchase Agreement, the consummation by the Trust of the transactions
contemplated by the Purchase Agreement and compliance by the Trust with its
obligations thereunder; and
(x) the
holders of the Preferred Securities (other than those holders who reside or
are
domiciled in the State of Delaware) will have no liability for income taxes
imposed by the State of Delaware solely as a result of their participation
in
the Trust and the Trust will not be liable for any income tax imposed by the
State of Delaware.
In
rendering such opinions, such counsel may (A) state that its opinion is
limited to the laws of the State of Delaware, (B) rely as to matters of
fact, to the extent deemed proper, on certificates of responsible officers
of
the Company and public officials and (C) take customary assumptions and
exceptions as to enforceability and other matters.
C-2
ANNEX
D
Pursuant
to Section 3(f) of the Purchase Agreement, Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ LLP, special
counsel for the Property Trustee and the Indenture Trustee, shall deliver an
opinion to the effect that:
(i) The
Bank
of New York Trust Company, National Association (the “Bank”) is a national
banking association with trust powers, duly and validly existing under the
laws
of the United States of America, with corporate power and authority to execute,
deliver and perform its obligations under the Indenture and to authenticate
and
deliver the Securities, and is duly eligible and qualified to act as Trustee
under the Indenture pursuant to Section 6.1 thereof
and as Property Trustee under the Trust Agreement pursuant to Section 8.2
thereof. (The Indenture and the Trust Agreement are each, an “Agreement” and
together, the “Agreements”).
(ii) Each
Agreement has been duly authorized, executed and delivered by the Bank and
constitutes the valid and binding obligation of the Bank, enforceable against
it
in accordance with its terms except (A) as may be limited by bankruptcy,
fraudulent conveyance, fraudulent transfer, insolvency, reorganization,
liquidation, receivership, moratorium or other similar laws now or hereafter
in
effect relating to creditors’ rights generally, and by general equitable
principles, regardless of whether considered in a proceeding in equity or at
law
and (B) that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.
(iii) Neither
the execution or delivery by the Bank of the Agreements, the authentication
and
delivery of the Preferred Securities (as defined in the Trust Agreement) and
junior subordinated notes (issued under the Indenture, and together with the
Preferred Securities, the “Securities”) by the Trustee pursuant to the terms of
the Agreements, nor the performance by the Bank of its obligations under the
Agreements (A) requires the consent or approval of, the giving of notice to
or
the registration or filing with, any governmental authority or agency under
any
existing law of the United States of America governing the banking or trust
powers of the Bank or (B) violates or conflicts with the Articles of Association
or By-laws of the Bank or any law or regulation of the State of New York or
the
United States of America governing the banking or trust powers of the
Bank.
(iv) The
Securities have been authenticated and delivered by a duly authorized officer
of
the Bank.
In
rendering such opinions, such counsel may (A) state that its opinion is limited
to the laws of the State of New York 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 The Bank of New York Trust Company,
National Association, the Company and public officials, and (C) make customary
assumptions and exceptions as to enforceability and other matters.
D-1
ANNEX
E
Pursuant
to Section 3(g) of the Purchase Agreement, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Finger, P.A.,
counsel for the Delaware Trustee, shall deliver an opinion to the effect
that:
(i) The
Bank
of New York (Delaware) (the “Delaware Trustee”) is duly incorporated and validly
existing as a banking corporation under the laws of the State of
Delaware;
(ii) The
Delaware Trustee has the corporate power and authority to execute, deliver
and
perform its obligations under, and has taken all necessary corporate action
to
authorize the execution, delivery and performance of, the Trust Agreement and
to
consummate the transactions contemplated thereby;
(iii) The
Trust
Agreement has been duly authorized, executed and delivered by the Delaware
Trustee and constitutes a legal, valid and binding obligation of the Delaware
Trustee, and is enforceable against the Delaware Trustee, in accordance with
its
terms subject, as to enforcement, to the effect upon the Trust Agreement of
(i)
applicable bankruptcy, insolvency, reorganization, moratorium, receivership,
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) The
execution, delivery and performance by the Delaware Trustee of the Trust
Agreement do not conflict with or result in a violation of (A) articles of
association or by-laws of the Delaware Trustee or
(B)
any law or regulation of the State of Delaware or the United States of America
governing the trust powers of the Delaware Trustee or, to our knowledge, without
independent investigation, of any indenture, mortgage, bank credit agreement,
note or bond purchase agreement, long-term lease, license or other agreement
or
instrument to which the Delaware Trustee is a party or by which it is bound
or,
to our knowledge, without independent investigation, of any judgment or order
applicable to the Delaware Trustee; and
(v) No
approval, authorization or other action by, or filing with, any Governmental
Entity of the State of Delaware or the United States of America governing the
trust powers of the Delaware Trustee is required in connection with the
execution and delivery by the Delaware Trustee of
the
Trust Agreement or the performance by the Delaware Trustee of its obligations
thereunder, except for the filing of the Certificate of Trust with the Secretary
of State of the State of Delaware, which Certificate of Trust has been filed
with the Secretary of State of the State of Delaware.
In
rendering such opinions, such counsel may (A) state that its opinion is
limited to the laws of the State of Delaware and the federal laws of the
United States governing the trust powers of the Delaware Trustee,
(B) rely as to matters of fact, to the extent deemed proper, on
certificates of responsible officers of the Company and public officials and
(C)
take customary assumptions and exceptions.
E-1
ANNEX
F
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(h) of the Purchase Agreement, dated as of
December 12, 2006, among Redwood Trust, Inc. (the “Company”), Redwood Capital
Trust I (the “Trust”) and Bear, ▇▇▇▇▇▇▇ & Co. Inc., 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
|
_____%
|
*
A table
describing the officer’s financial certificate calculation procedures is
provided on page 3
[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).
F-1
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. | ||
| ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
| ▇▇▇▇▇ ▇▇▇ | ||
| ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ | ||
|
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
|
||