AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 2, 2001
REGISTRATION NO. 333-25643
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
------------------------
REDWOOD TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
591 REDWOOD HIGHWAY, SUITE 3100
MILL VALLEY, CA 94941
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
GEORGE E. BULL III
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
REDWOOD TRUST, INC.
591 REDWOOD HIGHWAY, SUITE 3100
MILL VALLEY, CA 94941
(415) 389-7373
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
PHILLIP R. POLLOCK, ESQ.
TOBIN & TOBIN
500 SANSOME STREET, 8TH FLOOR
SAN FRANCISCO, CA 94111
(415) 433-1400
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
At any time and from time to time after the effective date of this Registration
Statement
in light of market conditions and other factors
------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] __________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check box: [X]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THIS PRELIMINARY OFFICIAL STATEMENT AND THE INFORMATION CONTAINED HEREIN
ARE SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE OFFICIAL
STATEMENT IS DELIVERED IN FINAL FORM. UNDER NO CIRCUMSTANCES SHALL THIS
PRELIMINARY OFFICIAL STATEMENT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
PRELIMINARY PROSPECTUS SUPPLEMENT DATED , 2001
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MARCH 2, 2001)
Shares
REDWOOD TRUST, INC.
Common Stock
-------------------------
We are offering [ ] shares of our common stock, par value $0.01
per share at a price of $[ ] per share. We will receive all of the net
proceeds from the sale of such common stock. Our common stock is listed on the
New York Stock Exchange under the symbol RWT. The last reported sale price of
our common stock on March [ ], 2001 was $[ ] per share.
<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public offering price....................................... $ -- $ --
Underwriting discounts...................................... $ -- $ --
Proceeds, before expenses, to us............................ $ -- $ --
</TABLE>
NEITHER THE SECURITIES EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
We have granted an option for an additional [ ] shares of our
common stock at the public offering price, less the underwriting discounts to
the underwriters, solely to cover the over-allotments, if any.
We expect that the common stock will be ready for delivery on or about
[ ], 2001.
[Names of Lead Underwriters]
March [ ], 2001
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Forward-Looking Statements and Notice
About Information Presented......... S-2
The Company........................... S-3
Recent Developments................... S-4
Use of Proceeds....................... S-5
Risk Factors.......................... S-5
Capitalization........................ S-5
Federal Income Considerations......... S-6
Underwriting.......................... S-8
Legal Matters......................... S-9
</TABLE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS
About This Prospectus................. i
Private Securities Litigation Reform
Act
of 1995............................. i
The Company........................... 1
Use of Proceeds....................... 1
Description of Securities............. 1
Federal Income Tax Considerations..... 6
Plan of Distribution.................. 13
ERISA Investors....................... 15
Legal Matters......................... 15
Experts............................... 15
Where You Can Find More Information... 15
Incorporation by Reference............ 16
Information Not Required in
Prospectus.......................... II-1
</TABLE>
FORWARD-LOOKING STATEMENTS AND NOTICE ABOUT INFORMATION PRESENTED
This prospectus supplement and the accompanying prospectus contain or
incorporate by reference certain forward-looking statements. When used,
statements which are not historical in nature, including the words "anticipate,"
"estimate," "should," "expect," "believe," "intend," and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements are subject to risks and uncertainties, including, among other
things, changes in interest rates on our mortgage assets and borrowings, changes
in prepayment rates on our mortgage assets, general economic conditions,
particularly as they affect the price of mortgage assets and the credit status
of borrowers, and the level of liquidity in the capital markets, as it affects
our ability to finance our mortgage asset portfolio.
Other risks, uncertainties and factors that could cause actual results to
differ materially from those projected are detailed from time to time in reports
filed by us with the Securities and Exchange Commission or SEC, including Forms
10-Q and 10-K.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in or incorporated by reference into this prospectus supplement
and the accompanying prospectus might not occur.
You should rely only on the information contained in or incorporated by
reference into this prospectus supplement and the accompanying prospectus. We
have not authorized any person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. The information in this
prospectus supplement and the accompanying prospectus is current as of the date
such information is presented. Our business, financial condition, results of
operations and prospects may have changed since such dates.
S-2
THE COMPANY
Redwood Trust, Inc. is a real estate finance company specializing in
owning, financing, and credit-enhancing high-quality jumbo residential mortgage
loans nationwide.
Jumbo residential mortgage loans have loan balances that exceed the
financing limit imposed on the government-sponsored real estate finance
companies -- Fannie Mae and Freddie Mac.
Redwood finances high-quality jumbo residential mortgage loans in two ways.
In our retained residential loan portfolio, we acquire loans and hold them on
our balance sheet to earn interest income. We typically fund the purchase of
these loans through the issuance of long-term amortizing debt. In our
credit-enhancement portfolio, we enable the securitization and funding of loans
in the capital markets by committing our capital to partially credit-enhance the
loans. We do this by structuring and acquiring subordinated credit-enhancement
interests that are created at the time the loans are securitized.
To create jumbo loan financing opportunities for our retained residential
loan portfolio and our credit-enhancement portfolio, we work actively with
mortgage origination companies that are selling newly originated loans and with
banks that are selling seasoned loan portfolios.
We also finance U.S. real estate in a number of other ways, including
through our investment portfolio (investment-grade mortgage securities) and our
commercial loan portfolio.
Our primary source of revenues is monthly payments made by homeowners on
their mortgages. Our primary expense is the cost of borrowed funds. Since we are
structured as a Real Estate Investment Trust (REIT), we distribute the bulk of
our net earnings to shareholders as dividends.
Redwood Trust, Inc. was incorporated in the State of Maryland on April 11,
1994 and commenced operations on August 19, 1994. We have elected, and intend to
continue to elect, to be taxed as a REIT. Assuming we retain such REIT status,
we generally will be permitted to deduct dividend distributions to stockholders
from our taxable income, thereby eliminating the "double taxation" that
generally results when a corporation earns income and distributes that income to
stockholders in the form of dividends. We are self-advised and self-managed. Our
principal executive offices are located at 591 Redwood Highway, Suite 3100, Mill
Valley, CA 94941, telephone 415-389-7373.
S-3
RECENT DEVELOPMENTS
[RESERVED]
S-4
USE OF PROCEEDS
The net proceeds to be received by us from the sale of the [ ]
shares of common stock in this offering are estimated to be approximately
$[ ] after deducting underwriting discounts and commissions and
estimated expenses. We intend to use the net proceeds, together with borrowings,
to purchase mortgage assets. Pending use of the proceeds to purchase such
mortgage assets, the net proceeds will be used to reduce borrowings. We intend
to increase our investment in mortgage assets by borrowing against existing
mortgage assets and using the proceeds to acquire additional mortgage assets.
Our borrowings are secured by mortgage assets owned by us.
RISK FACTORS
See the risk factors beginning on page 13 of our Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, which is incorporated by reference,
for a discussion of certain factors that should be considered by prospective
purchasers of shares of our common stock.
CAPITALIZATION
The following table sets forth our actual capitalization at September 30,
2000 and as adjusted to give effect to the issuance of [ ] shares of
our common stock offered hereby and the application of the estimated net
proceeds therefrom.
<TABLE>
<CAPTION>
SEPTEMBER 30, 2000
-----------------------
STOCKHOLDERS' EQUITY ACTUAL AS ADJUSTED
-------------------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Preferred stock: par value $0.01 per share; Class B 9.74%
Cumulative Convertible 902,068 shares authorized, issued
and outstanding ($28,645 aggregate liquidation
preference)............................................... $ 26,517
Common stock: par value $0.01 per share; 49,097,932 shares
authorized; 8,809,356 issued and outstanding (as adjusted
[ ] shares....................................... 88 $ --
Additional paid-in capital.................................. 242,520 --
Accumulated other comprehensive loss........................ (4,001) --
Cumulative earnings......................................... 21,430 --
Cumulative distributions to stockholders.................... (75,891) --
-------- --------
Total.................................................. $210,663 $ --
======== ========
</TABLE>
S-5
FEDERAL INCOME CONSIDERATIONS
The following discussion summarizes the material federal income tax
consequences that may be relevant to a prospective purchaser of securities. It
is not exhaustive of all possible tax considerations. It does not give a
detailed discussion of any state, local or foreign tax considerations, nor does
it discuss all of the aspects of federal income taxation that may be relevant to
a prospective investor in light of such investor's particular circumstances or
to certain types of investors subject to special treatment under federal income
tax laws, including insurance companies, certain tax-exempt entities, financial
institutions, broker/dealers, foreign corporations and persons who are not
citizens or residents of the United States.
EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR REGARDING THE SPECIFIC CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSIDERATIONS OF SUCH PURCHASE, OWNERSHIP AND SALE AND
THE POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
GENERAL
The Code provides special tax treatment for organizations that qualify and
elect to be taxed as REITs. The discussion of various aspects of federal
taxation contained below and in the underlying prospectus under the heading
"Federal Income Tax Considerations," summarize the material federal income tax
provisions applicable to Redwood Trust as a REIT and to investors in connection
with their ownership of Redwood Trust's securities. The discussions are based on
the Code, administrative regulations, judicial decisions, administrative rulings
and practice as in effect today, all of which are subject to change. In brief,
if certain detailed conditions imposed by the Code are met, entities that invest
primarily in real estate assets, including mortgage loans, and that otherwise
would be taxed as corporations are, with certain limited exceptions, not taxed
at the corporate level on their taxable income that is currently distributed to
their stockholders. This treatment eliminates most of the "double taxation," at
the corporate level and then again at the stockholder level when the income is
distributed, that typically results from the use of corporate investment
vehicles. A qualifying REIT, however, may be subject to certain excise and other
taxes, as well as normal corporate tax, on taxable income that is not currently
distributed to its stockholders.
Redwood Trust made an election to be taxed as a REIT under the Code
commencing with its taxable year ending December 31, 1994.
In the opinion of GnazzoThill, A Professional Corporation, special tax
counsel to Redwood Trust, Redwood Trust, exclusive of any taxable affiliates,
has been organized and operated in a manner which qualifies it as a REIT under
the Code since the commencement of its operations on August 19, 1994 through
September 30, 2000, the date of Redwood Trust's latest unaudited financial
statements received by special tax counsel. However, whether Redwood Trust does
and continues to so qualify will depend on actual operating results and
compliance with the various tests for qualification as a REIT relating to its
income, assets, distributions, ownership and certain administrative matters, the
results of which are not reviewed by special tax counsel on an ongoing basis. No
assurance can be given that the actual results of Redwood Trust's operations for
any one taxable year will satisfy those requirements. Moreover, certain aspects
of Redwood Trust's planned method of operations have not been considered by the
courts or the Internal Revenue Service in any published authorities that
interpret the requirements of REIT status. There can be no assurance that the
courts or the Internal Revenue Service will agree with this opinion. In
addition, qualification as a REIT depends on future transactions and events that
cannot be known at this time. Accordingly, special tax counsel will be unable to
opine whether Redwood Trust will in fact qualify as a REIT under the Code in all
events and for all periods.
The opinions of special tax counsel are based upon existing law including
the Internal Revenue Code of 1986, as amended, existing treasury regulations,
revenue rulings, revenue procedures, proposed regulations and case law, all of
which is subject to change both prospectively or retroactively. Moreover,
relevant laws or other legal authorities may change in a manner that could
adversely affect Redwood Trust or its stockholders.
S-6
In the event that Redwood Trust does not qualify as a REIT in any year, it
will be subject to federal income tax as a domestic corporation and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. To the extent that Redwood Trust would, as a consequence, be
subject to potentially significant tax liabilities, the amount of earnings and
cash available for distribution to its stockholders would be reduced.
TAXATION OF HOLDERS OF REDWOOD TRUST'S COMMON STOCK
General Taxation. For any taxable year in which Redwood Trust is treated as
a REIT for federal income purposes, amounts distributed by Redwood Trust to its
stockholders out of current or accumulated earnings and profits will be
includible by the stockholders as ordinary income for federal income tax
purposes unless properly designated by Redwood Trust as capital gain dividends.
In the latter case, the distributions will generally be taxable to the
stockholders as long-term capital gains.
Distributions of Redwood Trust will not be eligible for the dividends
received deduction for corporations that are stockholders. Stockholders may not
deduct any net operating losses or capital losses of Redwood Trust.
Upon a sale or disposition of common stock, a stockholder will generally
recognize a capital gain or loss in an amount equal to the difference between
the amount realized and the stockholder's adjusted basis in such stock, which
gain or loss will be long-term if the stock has been held for more than one
year. Any loss on the sale or exchange of shares of the stock of Redwood Trust
held by a stockholder for six months or less will be treated as a long-term
capital loss to the extent of any capital gain dividend received on the stock
held by such stockholders.
If Redwood Trust makes distributions to its stockholders in excess of its
current and accumulated earnings and profits, those distributions will be
considered first a tax-free return of capital, reducing the tax basis of a
stockholder's shares until the tax basis is zero. Such distributions in excess
of the tax basis will be taxable as gain realized from the sale of Redwood
Trust's shares.
Redwood Trust will notify stockholders after the close of Redwood Trust's
taxable year as to the portions of the distributions which constitute ordinary
income, return of capital and capital gain. Dividends and distributions declared
in the last quarter of any year payable to stockholders of record on a specified
date in such quarter will be deemed to have been received by the stockholders
and paid by Redwood Trust on December 31 of the record year, provided that such
dividends are paid before February 1 of the following year. If common stock is
sold after a record date but before a payment date for declared dividends on
such stock, a stockholder will nonetheless be required to include such dividend
in income in accordance with the rules above for distributions, whether or not
such dividend is required to be paid over to the purchaser.
Generally, a distribution of earnings from a REIT is considered for
estimated tax purposes only when the distribution is made. However, if Redwood
Trust is at any time deemed to be a "closely-held REIT" (a REIT in which at
least 50% of the vote or value is owned by 5 or fewer persons), any stockholder
owning 10% or more of the vote or value of Redwood's shares must accelerate
recognition of year-end distributions such shareholder receives from the REIT in
computing estimated tax payments. Redwood Trust is not currently, and does not
intend to be, a "closely-held REIT."
S-7
UNDERWRITING
[Names of lead underwriters] are acting as representatives of the
underwriters. Subject to the terms and conditions contained in the underwriting
agreement, we have agreed to sell to each underwriter, and each underwriter has
agreed to purchase from us the number of shares set forth opposite its name
below. The underwriting agreement provides that the obligation of the
underwriters to pay for and accept delivery of our common stock is subject to
approval of certain legal maters by counsel and to certain other conditions. The
underwriters are obligated to take and pay for all shares of our common stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
............................................. --
............................................. --
............................................. --
</TABLE>
The following table shows the per share and total underwriting discount we
will pay to the underwriters. Such amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase [ ]
additional shares of our common stock.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per Share........................................... $-- $--
Total............................................... $-- $--
</TABLE>
Each of our officers and directors has agreed with the representatives, for
a period of 90 days after the date of this prospectus supplement, subject to
certain exceptions, not to sell any shares of common stock or any securities
convertible into or exchangeable for shares of common stock owned by the
holders, without the prior written consent of the representatives. However, the
representatives may, in their sole discretion and at any time without notice,
release all or any portion of the securities subject to these agreements.
The underwriters propose to offer our common stock directly to the public
at $[ ] per share and to certain dealers at such price less a
concession not in excess of $[ ] per share. The underwriters may
allow, and such dealers may reallow, a concession not in excess of
$[ ] per share to certain dealers.
We expect to incur expenses of approximately $[ ] in
connection with this offering.
We have granted the underwriters an option exercisable for 30 days after
the date of this prospectus supplement to purchase up to [ ]
additional shares of common stock to cover over-allotments, if any, at the
public offering price less the underwriting discounts set forth on the cover
page of this prospectus supplement. If the underwriters exercise this option,
the underwriters will have a firm commitment, subject to certain conditions, to
purchase all of such shares covered thereby.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the underwriters may be required to make in respect
thereof.
In connection with this offering, the underwriters are permitted to engage
in certain transactions that stabilize the price of our common stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of our common stock.
If the underwriters create a short position in our common stock in
connection with the offering, i.e., if they sell more than [ ]
shares of common stock, the underwriters may reduce that short position by
purchasing our common stock in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
S-8
Neither we nor the underwriters make any representation or prediction as to
the direction or magnitude of any effect that the transactions described above
may have on the price of our common stock. In addition, neither we nor the
underwriters make any representation that the underwriters will engage in such
transactions or that such transactions, once commenced, will not be discontinued
without notice.
The representatives or their affiliates have provided, and may in the
future provide us with investment banking, financial advisory, or commercial
banking services, for which they have received and may receive customary
compensation.
LEGAL MATTERS
Certain legal matters relating to the common stock will be passed on for us
by Tobin & Tobin, a professional corporation, San Francisco, California. Legal
matters relating to our tax status as a REIT will be passed on by GnazzoThill,
A Professional Corporation, San Francisco, California. Certain legal matters
will be passed upon for the underwriters by [ ], San Francisco,
California.
S-9
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS
MARCH 2, 2001
$384,075,000
RWT
REDWOOD TRUST, INC.
Common Stock, Preferred Stock, Warrants,
and Shareholder Rights to Purchase
Common Stock and Preferred Stock
-------------------------
By this prospectus, we may offer, from time to time, securities consisting
of:
- shares of our common stock
- shares of our preferred stock
- any warrants to purchase our common stock or preferred stock
- rights to purchase our common stock or preferred stock issued to our
shareholders
- any combination of the foregoing
We will provide specific terms of these securities in supplements to this
prospectus. You should read this prospectus and any supplement carefully before
you decide to invest.
This prospectus may not be used to consummate sales of these securities
unless it is accompanied by a prospectus supplement.
The New York Stock Exchange lists our common stock under the symbol "RWT."
We also currently have one class of outstanding preferred stock listed under the
symbol "RWTB."
To ensure we qualify as a real estate investment trust, no person may own
more than 9.8% of the outstanding shares of any class of our common stock or our
preferred stock, unless our Board of Directors waives this limitation.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATIONS TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is March 2, 2001
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
About this Prospectus....................................... i
Private Securities Litigation Reform Act of 1995............ i
The Company................................................. 1
Use of Proceeds............................................. 1
Description of Securities................................... 1
Federal Income Tax Considerations........................... 6
Plan of Distribution........................................ 13
ERISA Investors............................................. 15
Legal Matters............................................... 15
Experts..................................................... 15
Where You Can Find More Information......................... 15
Incorporation by Reference.................................. 16
Information Not Required in Prospectus...................... II-1
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this process, we may offer and sell any combination of the securities covered by
this prospectus in one or more offerings up to a total dollar amount of
$384,075,000. This prospectus provides you with a general description of the
securities we may offer. Each time we offer to sell securities, we will provide
a supplement to this prospectus that will contain specific information about the
terms of that offering. The prospectus supplement may also add, update or change
information contained in this prospectus. You should read both this prospectus
and any prospectus supplement together with the additional information you may
need to make your investment decision.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This prospectus and the documents incorporated by reference herein contain
forward-looking statements, as defined in the Private Securities Litigation
Reform Act of 1995, that are based on our current expectations, estimates and
projections. Statements that are not historical facts, including statements
about our beliefs and expectations, are forward-looking statements. These
statements are not guarantees of future performance, events or results and
involve potential risks and uncertainties. Accordingly, our actual results may
differ from our current expectations, estimates and projections. We undertake no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
Important factors that may impact our actual results include changes in
interest rates, changes in the yield curve, changes in prepayment rates, the
supply of mortgage loans and mortgage securities, our ability to obtain
financing, the terms of any financing and other factors described in this
prospectus.
i
THE COMPANY
Redwood Trust, Inc. is a real estate finance company specializing in
owning, financing and credit-enhancing high-quality jumbo residential mortgage
loans nationwide. We also finance U.S. real estate in a number of other ways,
including through our investment portfolio (investment-grade mortgage
securities) and our commercial loan portfolio. Our primary source of revenues is
monthly payments made by homeowners on their mortgages. Our primary expense is
the cost of borrowed funds. Since we are structured as a Real Estate Investment
Trust (REIT), we distribute the bulk of our net earnings to shareholders as
dividends. Our REIT status permits us to deduct dividend distributions to
stockholders from our taxable income, thereby eliminating the "double taxation"
that generally results when a corporation earns income and distributes that
income to stockholders in the form of dividends. We are self-advised and
self-managed. Our principal executive offices are located at 591 Redwood
Highway, Suite 3100, Mill Valley, CA 94941, telephone 415-389-7373.
USE OF PROCEEDS
Unless otherwise specified in the applicable prospectus supplement, we
intend to use the net proceeds from the securities for acquisition of mortgage
assets and general corporate purposes. Pending any such uses, we may invest the
net proceeds from the sale of any securities or may use them to reduce
short-term or adjustable-rate indebtedness. If we intend to use the net proceeds
from a sale of securities to finance a significant acquisition of a business, a
related prospectus supplement will describe the material terms of such
acquisition.
DESCRIPTION OF SECURITIES
GENERAL
The following is a brief description of the material terms of our
securities that may be offered under this prospectus. This description does not
purport to be complete and is subject in all respects to applicable Maryland law
and to the provisions of our Charter and Bylaws, including any applicable
amendments or supplements thereto, copies of which are on file with the
Commission as described under "Available Information" and are incorporated by
reference herein.
We may offer under this prospectus one or more of the following types of
securities: shares of common stock, par value $0.01 per share; shares of
preferred stock, in one or more classes or series; common stock warrants;
preferred stock warrants; shareholder rights; and any combination of the
foregoing, either individually or as units consisting of one or more of the
foregoing types of securities. The terms of any specific offering of securities,
including the terms of any units offered, will be set forth in a prospectus
supplement relating to such offering.
Our current authorized equity capitalization consists of 50 million shares
which may be comprised of common stock and preferred stock. The common stock and
the only currently issued, authorized and outstanding preferred stock, the Class
B 9.74% Cumulative Convertible Preferred Stock (the "Class B Preferred Stock"),
are listed on the New York Stock Exchange, and we intend to so list any
additional shares of our common stock which are issued and sold hereunder. We
may elect to list any future class or series of our securities issued hereunder
on an exchange, but we are not obligated to do so.
COMMON STOCK
Common stockholders are entitled to receive dividends when, as and if
declared by our board of directors, out of legally available funds. In the case
of the Class B Preferred Stock and in the event any future class or series of
preferred stock is issued, dividends on any outstanding shares of preferred
stock are required to be paid in full before payment of any dividends on the
common stock. If we have a liquidation, dissolution or winding up, common
stockholders are entitled to share ratably in all of our assets available for
distribution after payment of all our debts and other liabilities and the
payment of all liquidation and
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other preference amounts to preferred stockholders then outstanding. There are
no preemptive or other subscription rights, conversion rights, or redemption or
sinking fund provisions with respect to shares of common stock.
Each holder of common stock is entitled to one vote per share with respect
to all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the common stock entitled
to vote in any election of directors may elect all of the directors standing for
election, subject to the voting rights, if any, of any class or series of
preferred stock that may be outstanding from time to time. Our charter and
bylaws contain no restrictions on our repurchase of shares of the common stock.
All the outstanding shares of common stock are, and additional shares of common
stock will be, validly issued, fully paid and nonassessable.
PREFERRED STOCK
Subject to the terms of the outstanding Class B Preferred Stock, our board
of directors is authorized to designate with respect to each class or series of
preferred stock the number of shares in each such class or series, the dividend
rates and dates of payment, voluntary and involuntary liquidation preferences,
redemption prices, if any, whether or not dividends shall be cumulative, and, if
cumulative, the date or dates from which the same shall be cumulative, the
sinking fund provisions if any, the terms and conditions on which shares can be
converted into or exchanged for shares of another class or series, and the
voting rights, if any.
Any preferred stock issued may rank prior to the common stock as to
dividends and will rank prior to the common stock as to distributions in the
event of our liquidation, dissolution or winding up. The ability of our board of
directors to issue preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting powers of common stockholders. The shares of
Class B Preferred Stock are, and any future shares of preferred stock will be,
validly issued, fully paid and nonassessable.
SECURITIES WARRANTS
We may issue securities warrants for the purchase of common stock or
preferred stock, respectively referred to as common stock warrants and preferred
stock warrants. Securities warrants may be issued independently or together with
any other securities offered by this prospectus and any accompanying prospectus
supplement and may be attached to or separate from such other securities. Each
issuance of the securities warrants will be issued under a separate securities
warrant agreement to be entered into by us and a bank or trust company, as
securities warrant agent, all as set forth in the prospectus supplement relating
to the particular issue of offered securities warrants. Each issue of securities
warrants will be evidenced by securities warrant certificates. The securities
warrant agent will act solely as an agent of ours in connection with the
securities warrants certificates and will not assume any obligation or
relationship of agency or trust for or with any holder of securities warrant
certificates or beneficial owners of securities warrants.
If we offer securities warrants pursuant to this prospectus in the future,
the applicable prospectus supplement will describe the terms of such securities
warrants, including the following, where applicable:
- the offering price;
- the aggregate number of shares purchasable upon exercise of such
securities warrants, and in the case of securities warrants for preferred
stock, the designation, aggregate number and terms of the class or series
of preferred stock purchasable upon exercise of such securities warrants;
- the designation and terms of the securities with which such securities
warrants are being offered, if any, and the number of such securities
warrants being offered with each such security;
- the date on and after which such securities warrants and any related
securities will be transferable separately;
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- the number of shares of preferred stock or shares of common stock
purchasable upon exercise of each of such securities warrant and the
price at which such number of shares of preferred stock or common stock
may be purchased upon such exercise;
- the date on which the right to exercise such securities warrants shall
commence and the expiration date on which such right shall expire;
- federal income tax considerations; and
- any other material terms of such securities warrants.
Holders of future securities warrants, if any, will not be entitled by
virtue of being such holders, to vote, to consent, to receive dividends, to
receive notice with respect to any meeting of stockholders for the election of
our directors or any other matter, or to exercise any rights whatsoever as
stockholders of Redwood Trust.
STOCKHOLDER RIGHTS
We may issue, as a dividend at no cost, stockholder rights to holders of
record of our securities or any class or series thereof on the applicable record
date. If stockholders rights are so issued to existing holders of securities,
each stockholder right will entitle the registered holder thereof to purchase
the securities pursuant to the terms set forth in the applicable prospectus
supplement.
If stockholder rights are issued, the applicable prospectus supplement will
describe the terms of such stockholder rights including the following where
applicable:
- record date;
- subscription price;
- subscription agent;
- aggregate number of shares of preferred stock or shares of common stock
purchasable upon exercise of such stockholder rights and in the case of
stockholder rights for preferred stock, the designation, aggregate number
and terms of the class or series of preferred stock purchasable upon
exercise of such stockholder rights;
- the date on which the right to exercise such stockholder rights shall
commence and the expiration date on which such right shall expire;
- federal income tax considerations; and
- and other material terms of such stockholder rights.
In addition to the terms of the stockholder rights and the securities
issuable upon exercise thereof, the prospectus supplement may describe, for a
holder of such stockholder rights who validly exercises all stockholder rights
issued to such holder, how to subscribe for unsubscribed securities, issuable
pursuant to unexercised stockholder rights issued to other holders, to the
extent such stockholder rights have not been exercised.
Holders of stockholder rights will not be entitled by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice with
respect to any meeting of stockholders for the election of our directors or any
other matter, or to exercise any rights whatsoever as stockholders of Redwood
Trust, except to the extent described in the related prospectus supplement.
RESTRICTIONS ON OWNERSHIP AND TRANSFER AND REPURCHASE OF SHARES
In order that we may meet the requirements for qualification as a REIT at
all times, our charter prohibits any person from acquiring or holding beneficial
ownership of a number of shares of common stock or preferred stock
(collectively, the "capital stock") in excess of 9.8% of the outstanding shares
of the related class of capital stock. For this purpose, the term "beneficial
ownership" means beneficial
3
ownership, as determined under Rule 13d-3 under the Securities Exchange Act of
1934, of capital stock by a person, either directly or constructively under the
constructive ownership provisions of Section 544 of the Code and related
provisions.
Under the constructive ownership rules of Section 544 of the Code, a holder
of a warrant will be treated as owning the number of shares of capital stock
into which such warrant may be converted. In addition, the constructive
ownership rules generally attribute ownership of securities owned by a
corporation, partnership, estate or trust proportionately to its stockholders,
partners or beneficiaries, respectively. The rules may also attribute ownership
of securities owned by family members to other members of the same family and
treat securities with respect to which a person has an option to purchase as
actually owned by that person. The rules further provide when securities
constructively owned by a person are considered to be actually owned for the
application of such attribution provisions. To determine whether a person holds
or would hold capital stock in excess of the 9.8% ownership limit, a person will
be treated as owing not only shares of capital stock actually owned, but also
any shares of capital stock attributed to that person under the attribution
rules described above. Accordingly, a person who individually owns less than
9.8% of the shares outstanding may nevertheless be in violation of the 9.8%
ownership limit.
Any transfer of shares of capital stock warrants that would cause us to be
disqualified as a REIT or that would create a direct or constructive ownership
of shares of capital stock in excess of the 9.8% ownership limit, or result in
the shares of capital stock being beneficially owned, within the meaning of
Section 856(a) of the Code, by fewer than 100 persons, determined without any
reference to any rules of attribution, or result in us being closely held within
the meaning of Section 856(h) of the Code, will be null and void, and the
intended transferee will acquire no rights to those shares or warrants. These
restrictions on transferability and ownership will not apply if our board
determines that it is no longer in our best interests to continue to qualify as
a REIT.
Any purported transfer of shares of capital stock or warrants that would
result in a purported transferee owning, directly or constructively, shares in
excess of the 9.8% ownership limit due to the unenforceability of the transfer
restrictions described above will constitute excess securities. Excess
securities will be transferred by operation of law to Redwood Trust as trustee
for the exclusive benefit of the person or persons to whom the excess securities
are ultimately transferred, until such time as the purported transferee
retransfers the excess securities. While the excess securities are held in
trust, a holder of such securities will not be entitled to vote or to share in
any dividends or other distributions with respect to such securities and will
not be entitled to exercise or convert such securities into shares of capital
stock. Subject to the 9.8% ownership limit, excess securities may be transferred
by the purported transferee to any person (if such transfer would not result in
excess securities) at a price not to exceed the price paid by the purported
transferee (or, if no consideration was paid by the purported transferee, the
fair market value of the excess securities on the date of the purported
transfer), at which point the excess securities will automatically be exchanged
for the stock or warrants, as the case may be, to which the excess securities
are attributable. If a purported transferee receives a higher price for
designating an ultimate transferee, such purported transferee shall pay, or
cause the ultimate transferee to pay, such excess to us. In addition, such
excess securities held in trust are subject to purchase by us at a purchase
price equal to the lesser of (a) the price per share or per warrant, as the case
may be, in the transaction that created such excess securities (or, in the case
of a devise or gift, the market price at the time of such devise or gift),
reduced by the amount of any distributions received in violation of the charter
that have not been repaid to us, and (b) the market price as reflected in the
last reported sales price of such shares of stock or warrants on the trading day
immediately preceding the date of the purchase by us as reported on any exchange
or quotation system over which such shares of stock or warrants may be traded,
or if not then traded over any exchange or quotation system, then the market
price of such shares of stock or warrants on the date of the purported transfer
as determined in good faith by our board of directors, reduced by the amount of
any distributions received in violation of the charter that have not been repaid
to us.
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Upon a purported transfer of excess securities, the purported transferee
shall cease to be entitled to distributions, voting rights and other benefits
with respect to the shares of capital stock or warrants except the right to
payment of the purchase price for the shares of capital stock or warrants on the
retransfer of securities as provided above. Any dividend or distribution paid to
a purported transferee on excess securities prior to our discovery that shares
of capital stock have been transferred in violation of our articles of
incorporation shall be repaid to us upon demand. If these transfer restrictions
are determined to be void, invalid or unenforceable by a court of competent
jurisdiction, then the purported transferee of any excess securities may be
deemed, at our option, to have acted as an agent on our behalf in acquiring the
excess securities and to hold the excess securities on our behalf.
All certificates representing shares of capital stock and warrants will
bear a legend referring to the restrictions described above.
Any person who acquires shares or warrants in violation of our Charter, or
any person who is a purported transferee such that excess securities result,
must immediately give written notice or, in the event of a proposed or attempted
transfer that would be void as set forth above, give at least 15 days prior
written notice to us of such event and shall provide us such other information
as we may request in order to determined the effect, if any, of the transfer on
our status as a REIT. In addition, every record owner of more than 5.0%, during
any period in which the number of record stockholders is 2,000 or more, or 1.0%,
during any period in which the number of record stockholders is greater than 200
but less than 2,000 or more, or 1/2%, during any period in which the number of
record stockholders is 200 or less, of the number or value of our outstanding
shares must send us an annual written notice by January 31 describing how the
shares are held. Further, each stockholder upon demand is required to disclose
to us in writing such information with respect to the direct and constructive
ownership of shares and warrants as our board deems reasonably necessary to
comply with the REIT provisions of the Code, to comply with the requirements of
any taxing authority or governmental agency or to determine any such compliance.
Our board may increase or decrease the 9.8% ownership limit. In addition,
to the extent consistent with the REIT provisions of the Code, our board may,
pursuant to our Charter, waive the 9.8% ownership limit for a purchaser of our
stock. As a condition to such waiver the intended transferee must give written
notice to the board of the proposed transfer no later than the fifteenth day
prior to any transfer which, if consummated, would result in the intended
transferee owning shares in excess of the ownership limit. Our board may also
take such other action as it deems necessary or advisable to protect our status
as a REIT.
The provisions described above may inhibit market activity and the
resulting opportunity for the holders of our capital stock and warrants to
receive a premium for their shares or warrants that might otherwise exist in the
absence of such provisions. Such provisions also may make us an unsuitable
investment vehicle for any person seeking to obtain ownership of more than 9.8%
of the outstanding shares of our capital stock.
MARYLAND CONTROL SHARE ACQUISITION STATUTE
The Maryland General Corporation Law provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control shares" are voting shares of stock which, if aggregated with all other
shares of stock owned by such a person, would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-tenth or more but less than one third, (ii) one-third or more but
less than a majority, or (iii) a majority or more of all voting power. "Control
shares" do not include shares of stock the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A "control
share acquisition" means, subject to certain exceptions, the acquisition of,
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding control shares.
A person who has made or proposes to make a "control share acquisition,"
upon satisfaction of certain conditions, including an undertaking to pay
expenses, may compel the board of directors to call a
5
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders' meeting. If
voting rights are not approved at the meeting or if the acquiring person does
not deliver an acquiring person statement as permitted by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the "control shares," except those for which voting rights have
previously been approved, for fair value determined, without regard to absence
of voting rights, as of the date of the last control share acquisition or of any
meeting of stockholders at which the voting rights of such shares are considered
and not approved. If voting rights for "control shares" are approved at a
stockholders meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the stock, as determined for purposes of such appraisal rights
may not be less than the highest price per share paid in the control share
acquisition, and certain limitations and restrictions otherwise applicable to
the exercise of dissenters' rights do not apply in the context of "control share
acquisitions."
The "control share acquisition" statute does not apply to stock acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a provision of the
charter or bylaws of the corporation adopted prior to the acquisition of the
shares. The control share acquisition statute could have the effect of
discouraging offers to acquire us and of increasing the difficulty of
consummating any such offers, even if the acquisition would be in our
stockholders' best interests.
TRANSFER AGENT AND REGISTRAR
Mellon Investor Services LLC is the transfer agent and registrar with
respect to our securities.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material federal income tax
consequences that may be relevant to a prospective purchaser of securities. It
is not exhaustive of all possible tax considerations. It does not give a
detailed discussion of any state, local or foreign tax considerations, nor does
it discuss all of the aspects of federal income taxation that may be relevant to
a prospective investor in light of such investor's particular circumstances or
to certain types of investors subject to special treatment under federal income
tax laws, including insurance companies, certain tax-exempt entities, financial
institutions, broker/dealers, foreign corporations and persons who are not
citizens or residents of the United States.
EACH PROSPECTIVE PURCHASER OF SECURITIES IS ADVISED TO CONSULT WITH HIS OR
HER OWN TAX ADVISOR REGARDING THE SPECIFIC CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF SECURITIES, INCLUDING THE FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSIDERATIONS OF SUCH PURCHASE, OWNERSHIP AND SALE AND
THE POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
GENERAL
The Code provides special tax treatment for organizations that qualify and
elect to be taxed as REITs. The discussion of various aspects of federal
taxation contained in this prospectus is based on the Code, administrative
regulations, judicial decisions, administrative rulings and practice as in
effect today, all of which are subject to change. In brief, if certain detailed
conditions imposed by the Code are met, entities that invest primarily in real
estate assets, including mortgage loans, and that otherwise would be taxed as
corporations are, with certain limited exceptions, not taxed at the corporate
level on their taxable income that is currently distributed to their
stockholders. This treatment eliminates most of the "double taxation," at the
corporate level and then again at the stockholder level when the income is
distributed, that typically results from the use of corporate investment
vehicles. A qualifying REIT, however, may be subject to certain excise and other
taxes, as well as normal corporate tax, on taxable income that is not currently
distributed to its stockholders.
6
Redwood Trust made an election to be taxed as a REIT under the Code
commencing with its taxable year ending December 31, 1994.
In the opinion of GnazzoThill, A Professional Corporation, special tax
counsel to Redwood Trust, Redwood Trust, exclusive of any taxable affiliates,
has been organized and operated in a manner which qualifies it as a REIT under
the Code since the commencing of its operations on August 19, 1994 through
September 30, 2000, the date of Redwood Trust's latest unaudited financial
statements received by special tax counsel. However, whether Redwood Trust does
and continues to so qualify will depend on actual operating results and
compliance with the various tests for qualification as a REIT relating to its
income, assets, distributions, ownership and certain administrative matters, the
results of which are not reviewed by special tax counsel on an ongoing basis. No
assurance can be given that the actual results of Redwood Trust's operations for
any one taxable year will satisfy those requirements. Moreover, certain aspects
of Redwood Trust's planned method of operations have not been considered by the
courts or the Internal Revenue Service in any published authorities that
interpret the requirements of REIT status. There can be no assurance that the
courts or the Internal Revenue Service will agree with this opinion. In
addition, qualification as a REIT depends on future transactions and events that
cannot be known at this time. Accordingly, special tax counsel will be unable to
opine whether Redwood Trust will in fact qualify as a REIT under the Code in all
events and for all periods.
The opinions of special tax counsel are based upon existing law including
the Internal Revenue Code of 1986, as amended, existing treasury regulations,
revenue rulings, revenue procedures, proposed regulations and case law, all of
which is subject to change both prospectively or retroactively. Moreover,
relevant laws or other legal authorities may change in a manner that could
adversely affect Redwood Trust or its stockholders.
In the event that Redwood Trust does not qualify as a REIT in any year, it
will be subject to federal income tax as a domestic corporation and its
stockholders will be taxed in the same manner as stockholders of ordinary
corporations. To the extent that Redwood Trust would, as a consequence, be
subject to potentially significant tax liabilities, the amount of earnings and
cash available for distribution to its stockholders would be reduced. See
"Termination or Revocation of REIT Status" below for more detail.
QUALIFICATION AS A REIT
To qualify for tax treatment as a REIT under the Code, Redwood Trust must
meet certain tests which are described immediately below.
Ownership of Stock. For all taxable years after the first taxable year for
which a REIT election is made, Redwood Trust's shares of stock must be
transferable and must be held by a minimum of 100 persons for at least 335 days
of a 12 month year, or a proportionate part of a short tax year. Redwood Trust
must also use the calendar year as its taxable year for income tax purposes. In
addition, at all times during the second half of each taxable year, no more than
50% in value of the stock of Redwood Trust may be owned directly or indirectly
by five or fewer individuals. In determining whether Redwood Trust's shares are
held by five or fewer individuals, the attribution rules of Section 544 of the
Code (as modified by Section 856(h)(1)(B)(i) of the Internal Revenue Code)
apply. Redwood Trust's Charter imposes certain repurchase provisions and
transfer restrictions that are intended to avoid having more than 50% of the
value of Redwood Trust's stock being held by five or fewer individuals, directly
or constructively, at any time during the last half of any taxable year. These
repurchase transfer restrictions should not cause the stock to be treated as
"non-transferable" for purposes of qualification as a REIT. Redwood Trust
intends to satisfy both the 100 stockholder and 50%/5 stockholder individual
ownership limitations described above for as long as it seeks qualification as a
REIT.
Nature of Assets. On the last day of each calendar quarter at least 75% of
the value of Redwood Trust's assets must consist of qualified REIT assets,
government securities, cash and cash items (the "75% Assets Test"). Redwood
Trust expects that substantially all of its assets will be "qualified REIT
assets."
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Qualified REIT assets generally include interests in real property, interests in
mortgage loans secured by real property, and interests in other REITs, REMICs
and regular interests in FASITs.
For tax years beginning before December 31, 2000, on the last day of each
calendar quarter, of the investments in securities not included in the 75%
Assets Test, the value of any one issuer's securities may not exceed 5% by value
of Redwood Trust's total assets and Redwood Trust may not own more than 10% of
any one issuer's outstanding voting securities. For tax years beginning after
December 31, 2000, of the investments in securities not included in the 75%
Assets Test, the securities of one or more taxable REIT subsidiary may not
exceed 20% by value of Redwood Trust's total assets and, other than with respect
to taxable REIT subsidiaries, the value of any one issuer's securities may not
exceed 5% by value of Redwood Trust's total assets and Redwood Trust may not own
more than 10% of the voting power or value of any one issuer's securities.
Pursuant to its compliance guidelines, Redwood Trust intends to monitor closely,
on not less than a quarterly basis, the purchase and holding of Redwood Trust's
assets in order to comply with the above assets tests. In particular, as of the
end of each calendar quarter Redwood Trust intends to limit and diversify its
ownership of securities of any other entity, hedging contracts and other
mortgage securities that do not constitute qualified REIT assets to less than
25%, in the aggregate, by value of its portfolio, to less than 20% by value in
any taxable REIT subsidiary and, other than with respect to any taxable REIT
subsidiary, to less than 5% by value as to any single issuer, including the
stock of any taxable affiliate of Redwood Trust, and to less than 10% of the
voting stock or value of any single issuer. If such limits are ever exceeded,
Redwood Trust intends to take appropriate remedial action to dispose of such
excess assets within the 30 day period after the end of the calendar quarter, as
permitted under the Code.
When purchasing mortgage-related securities, Redwood Trust may rely on
opinions of counsel for the issuer or sponsor of such securities given in
connection with the offering of such securities, or statements made in related
offering documents, for purposes of determining whether and to what extent those
securities (and the income therefrom) constitute qualified REIT assets and
income for purposes of the 75% Assets Test, and the source of income tests
discussed below. If Redwood Trust invests in a partnership, Redwood Trust will
be treated as receiving its share of the income and loss of the partnership and
owning a proportionate share of the assets of the partnership and any income
from the partnership will retain the character that it had in the hands of the
partnership.
Sources of Income. Redwood Trust must meet two separate income-based tests
for each year to qualify as a REIT.
1. THE 75% TEST. At least 75% of Redwood Trust's gross income for the
taxable year must be derived from the following sources among others: (1)
interest, other than interest based in whole or in part on the income or
profits of any person, on obligations secured by mortgages on real property
or on interests in real property; (2) gains from the sale or other
disposition of interests in real property and real estate mortgages, other
than gain from property held primarily for sale to customers in the
ordinary course of Redwood Trust's business, known as "dealer property";
(3) income from the operation, and gain from the sale, of property acquired
at or in lieu of a foreclosure of the mortgage secured by such property or
as a result of a default under a lease of such property, known as
"foreclosure property"; (4) income received as consideration for entering
into agreements to make loans secured by real property or to purchase or
lease real property, including interests in real property and interests in
mortgages on real property, for example, commitment fees; (5) rents from
real property; and (6) income attributable to stock or debt instruments
acquired with the proceeds from the sale of stock or certain debt
obligations, or new capital, of Redwood Trust received during the one-year
period beginning on the day such proceeds were received, or qualified
temporary investment income. The investments that Redwood Trust intends to
make will give rise primarily to mortgage interest qualifying under the 75%
income test.
2. THE 95% TEST. In addition to deriving 75% of its gross income from
the sources listed above, at least an additional 20% of Redwood Trust's
gross income for the taxable year must be derived from those sources, or
from dividends, interest or gains from the sale or disposition of stock or
other
8
securities that are not dealer property. Income attributable to assets
other than qualified REIT assets, such as income from or gain on the
disposition of qualified liability hedges, that Redwood Trust holds,
dividends on stock including any dividends from a taxable affiliate,
interest on any other obligations not secured by real property, and gains
from the sale or disposition of stock or other securities that are not
qualified REIT assets will constitute qualified income for purposes of the
95% income test only, and will not be qualified income for purposes of the
75% income test. Income from mortgage servicing, loan guarantee fees or
other contracts under which Redwood Trust would earn fees for performing
services, and asset hedging will not qualify for either the 95% or 75%
income tests. Redwood Trust intends to maintain its REIT status by
carefully monitoring its income, including income from hedging
transactions, futures contracts and sales of Mortgage Assets to comply with
the 75% income test and the 95% income test. Redwood Trust intends to
severely limit its acquisition of any assets or investments the income from
which does not qualify for purposes of the 95% income test. Moreover, in
order to help ensure compliance with the 95% income test and the 75% income
test, Redwood Trust has adopted guidelines the effect of which will be to
limit substantially all of the assets that it acquires, other than the
shares of Holdings and qualified liability hedges, to qualified REIT
assets. The policy of Redwood Trust to maintain REIT status may limit the
type of assets, including hedging contracts, that Redwood Trust otherwise
might acquire.
For purposes of determining whether Redwood Trust complies with the 75%
income test and the 95% income test detailed above, gross income does not
include gross income from "prohibited transactions." A "prohibited transaction"
is one involving a sale of dealer property, other than foreclosure property. Net
income from "prohibited transactions" is subject to a 100% tax. See "-- Taxation
of Redwood Trust" in this prospectus for more detail.
If Redwood Trust fails to satisfy one or both of the 75% or 95% income
tests for any year, it may face either (a) assuming such failure was for
reasonable cause and not willful neglect, a 100% tax on the greater of the
amounts of income by which it failed to comply with the 75% test of income or
the 95% income test, reduced by estimated related expenses or (b) loss of REIT
status. There can be no assurance that Redwood Trust will always be able to
maintain compliance with the gross income tests for REIT qualification despite
Redwood Trust's periodic monitoring procedures. Moreover, there is no assurance
that the relief provisions for a failure to satisfy either the 95% or the 75%
income tests will be available in any particular circumstance.
Distributions. Redwood Trust must distribute to its stockholders on a pro
rata basis each year an amount equal to (1) 95% of its taxable income before
deduction of dividends paid and excluding net capital gain, plus (2) 95% of the
excess of the net income from foreclosure property over the tax imposed on such
income by the Code, less (iii) any "excess noncash income". Beginning with the
2001 tax year, this distribution requirement has been reduced to 90%. Redwood
Trust intends to make distributions to its stockholders in amounts sufficient to
meet this distribution requirement. Such distributions must be made in the
taxable year to which they relate or, if declared before the timely filing of
Redwood Trust's tax return for such year and paid not later than the first
regular dividend payment after such declaration, in the following taxable year.
A nondeductible excise tax, equal to 4% of the excess of such required
distributions over the amounts actually distributed will be imposed on Redwood
Trust for each calendar year to the extent that dividends paid during the year,
or declared during the last quarter of the year and paid during January of the
succeeding year, are less than the sum of (1) 85% of Redwood Trust's "ordinary
income," (2) 95% of Redwood Trust's capital gain net income, and (3) income not
distributed in earlier years.
If Redwood Trust fails to meet the distribution test as a result of an
adjustment to Redwood Trust's tax returns by the Internal Revenue Service,
Redwood Trust, by following certain requirements set forth in the Code, may pay
a deficiency dividend within a specified period which will be permitted as a
deduction in the taxable year to which the adjustment is made. Redwood Trust
would be liable for interest based on the amount of the deficiency dividend. A
deficiency dividend is not permitted if the deficiency is due to fraud with
intent to evade tax or to a willful failure to file timely tax return.
9
TAXATION OF REDWOOD TRUST
In any year in which Redwood Trust qualifies as a REIT, it generally will
not be subject to federal income tax on that portion of its taxable income or
net capital gain which is distributed to its stockholders. Redwood Trust will,
however, be subject to tax at normal corporate rates upon any net income or net
capital gain not distributed. Redwood Trust intends to distribute substantially
all of its taxable income to its stockholders on a pro rata basis in each year.
In addition, Redwood Trust will also be subject to a tax of 100% of net
income from any prohibited transaction and will be subject to a 100% tax on the
greater of the amount by which it fails either the 75% or 95% income tests,
reduced by approximated expenses, if the failure to satisfy such tests is due to
reasonable cause and not willful neglect and if certain other requirements are
met. Redwood Trust may be subject to the alternative minimum tax on certain
items of tax preference.
If Redwood Trust acquires any real property as a result of foreclosure, or
by a deed in lieu of foreclosure, Redwood Trust may elect to treat such real
property as "foreclosure property." Net income from the sale of foreclosure
property is taxable at the maximum federal corporate rate, currently 35%. Income
from foreclosure property will not be subject to the 100% tax on prohibited
transactions. Redwood Trust will determine whether to treat such real property
as foreclosure property on the tax return for the fiscal year in which such
property is acquired.
For tax years beginning prior to 2001, REITs were generally limited to
holding non-voting stock in taxable affiliates. However, beginning with the 2001
tax year, REITs may own directly all of the stock, including voting stock, of a
taxable REIT subsidiary. Effective January 1, 2001, RWT Holdings, Inc.
("Holdings") and Redwood Trust elected to treat Holdings as a taxable REIT
subsidiary of Redwood Trust. Any other taxable subsidiaries of Redwood Trust
generally will also be converted to qualified taxable REIT subsidiaries. The
aggregate value of these taxable REIT subsidiaries must be limited to 20% of the
total value of Redwood Trust's assets. In addition, the taxable REIT
subsidiaries may not, directly or indirectly, operate or manage a lodging
facility or healthcare facility or provide to any person, under franchise,
license or otherwise, rights to any lodging facility or healthcare facility
brand name. In addition, Redwood Trust will be subject to a 100% penalty tax
equal to any rent or other charges that it imposed on any taxable REIT
subsidiary in excess of an arm's-length price for comparable services.
Redwood Trust will derive income from its taxable REIT subsidiaries by way
of dividends. Such dividends are non-real estate source income for purposes of
the 75% income test. Therefore, when aggregated with Redwood Trust's other
non-real estate source income, such dividends must be limited to 25% of Redwood
Trust's gross income each year. Redwood Trust will monitor the value of its
investment in its taxable REIT subsidiaries to ensure compliance with all
applicable income and asset tests.
Redwood Trust's taxable REIT subsidiaries are generally subject to
corporate level tax on their net income and will generally be able to distribute
only net after-tax earnings to its stockholders, including Redwood Trust, as
dividend distributions.
Redwood Trust will also be subject to the nondeductible 4% excise tax
discussed above if it fails to make timely dividend distributions for each
calendar year. Redwood Trust intends to declare its fourth regular annual
dividend during the final quarter of the year and to make such dividend
distribution no later than thirty-one (31) days after the end of the year in
order to avoid imposition of the excise tax. Such a distribution would be taxed
to the stockholders in the year that the distribution was declared, not in the
year paid. Imposition of the excise tax on Redwood Trust would reduce the amount
of cash available for distribution to Redwood Trust's stockholders. Shareholders
may also be required to include on their own returns certain undistributed
long-term capital gains earned by Redwood Trust and on which it has paid tax.
Shareholders shall receive a credit for the tax so paid by the REIT and shall
increase the basis in their stock by the excess of such gains over such tax
paid.
10
TERMINATION OR REVOCATION OF REIT STATUS
Redwood Trust's election to be treated as a REIT will be terminated
automatically if Redwood Trust fails to meet the requirements described above.
In that event, Redwood Trust will not be eligible again to elect REIT status
until the fifth taxable year which begins after the year for which Redwood
Trust's election was terminated unless all of the following relief provisions
apply:
- Redwood Trust did not willfully fail to file a timely return with respect
to the termination taxable year;
- inclusion of incorrect information in such return was not due to fraud
with intent to evade tax; and
- Redwood Trust establishes that failure to meet requirements was due to
reasonable cause and not willful neglect.
Redwood Trust may also voluntarily revoke its election, although it has no
intention of doing so, in which event Redwood Trust will be prohibited, without
exception, from electing REIT status for the year to which the revocation
relates and the following four taxable years.
If Redwood Trust fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, Redwood Trust would be subject to
tax, including any applicable alternative minimum tax, on its taxable income at
regular corporate rates. Distributions to stockholders of Redwood Trust with
respect to any year in which Redwood Trust fails to qualify as a REIT would not
be deductible by Redwood Trust nor would they be required to be made. Failure to
qualify as a REIT would result in Redwood Trust's reduction of its distributions
to stockholders in order to pay the resulting taxes. If, after forfeiting REIT
status, Redwood Trust later qualifies and elects to be taxed as a REIT again,
Redwood Trust could face significant adverse tax consequences.
TAXATION OF REDWOOD TRUST'S STOCKHOLDERS
General Taxation. For any taxable year in which Redwood Trust is treated as
a REIT for federal income purposes, amounts distributed by Redwood Trust to its
stockholders out of current or accumulated earnings and profits will be
includible by the stockholders as ordinary income for federal income tax
purposes unless properly designated by Redwood Trust as capital gain dividends.
In the latter case, the distributions will generally be taxable to the
stockholders as long-term capital gains.
Distributions of Redwood Trust will not be eligible for the dividends
received deduction for corporations that are stockholders. Stockholders may not
deduct any net operating losses or capital losses of Redwood Trust.
Upon a sale or disposition of either common stock or preferred stock, a
stockholder will generally recognize a capital gain or loss in an amount equal
to the difference between the amount realized and the stockholder's adjusted
basis in such stock, which gain or loss will be long-term if the stock has been
held for more than one year. Any loss on the sale or exchange of shares of the
stock of Redwood Trust held by a stockholder for six months or less will be
treated as a long-term capital loss to the extent of any capital gain dividend
received on the stock held by such stockholders.
If Redwood Trust makes distributions to its stockholders in excess of its
current and accumulated earnings and profits, those distributions will be
considered first a tax-free return of capital, reducing the tax basis of a
stockholder's shares until the tax basis is zero. Such distributions in excess
of the tax basis will be taxable as gain realized from the sale of Redwood
Trust's shares.
Redwood Trust will notify stockholders after the close of Redwood Trust's
taxable year as to the portions of the distributions which constitute ordinary
income, return of capital and capital gain. Dividends and distributions declared
in the last quarter of any year payable to stockholders of record on a specified
date in such quarter will be deemed to have been received by the stockholders
and paid by Redwood Trust on December 31 of the record year, provided that such
dividends are paid before February 1 of the following year. If either common or
preferred stock is sold after a record date but before a payment date
11
for declared dividends on such stock, a stockholder will nonetheless be required
to include such dividend in income in accordance with the rules above for
distributions, whether or not such dividend is required to be paid over to the
purchaser.
Generally, a distribution of earnings from a REIT is considered for
estimated tax purposes only when the distribution is made. However, if Redwood
Trust is at any time deemed to be a "closely-held REIT" (a REIT in which at
least 50% of the vote or value is owned by 5 or fewer persons), any stockholder
owning 10% or more of the vote or value of Redwood's shares must accelerate
recognition of year end distributions such shareholder receives from Redwood
Trust in computing estimated tax payments. Redwood Trust is not currently, and
does not intend to be, a "closely-held REIT."
Redwood Trust maintains a Dividend Reinvestment and Stock Purchase Plan or
DRP Plan, Registration No. 333-18061, effective January 2, 1997. DRP
participants will generally be treated as having received a dividend
distribution equal to the fair market value on the investment date of the plan
shares that are purchased with the participants' reinvested dividends and/or
optional cash payments on such date, plus the brokerage commissions, if any,
allocable to the purchase of such shares, and participants will have a tax basis
in the shares equal to such value. DRP participants may not, however, receive
any cash with which to pay the resulting tax liability. Shares received pursuant
to the DRP will have a holding period beginning on the day after their purchase
by the plan administrator.
Preferred Stock. Distributions, including constructive distributions, made
to holders of preferred stock, other than tax-exempt entities, will generally be
subject to tax as described above. For federal income tax purposes, earnings and
profits will be allocated to distributions with respect to the preferred stock
before they are allocated to distributions with respect to common stock.
Conversion of preferred stock into common stock. In general, no gain or
loss will be recognized for federal income tax purposes upon conversion of the
preferred stock solely into shares of common stock. The basis that a holder will
have for tax purposes in the shares of common stock received upon conversion
will be equal to the adjusted basis of the holder in the shares of preferred
stock so converted, and, provided that the shares of preferred stock were held
as a capital asset, the holding period for the shares of common stock received
would include the holding period for the shares of preferred stock converted. A
holder, however, generally will recognize gain or loss on the receipt of cash in
lieu of fractional shares of common stock in an amount equal to the difference
between the amount of cash received and the holder's adjusted basis for tax
purposes in the fractional share of preferred stock for which cash was received.
Furthermore, under certain circumstances, a holder of shares of preferred stock
may recognize gain or dividend income to the extent that there are dividends in
arrears on the shares at the time of conversion into common stock.
Adjustments to conversion price. Adjustments in the conversion price, or
the failure to make such adjustments, pursuant to the anti-dilution provisions
of the preferred stock or otherwise may result in constructive distributions to
the holder so preferred stock that could, under certain circumstances, be
taxable to them as dividends pursuant to Section 305 of the Code. If such a
constructive distribution were to occur, a holder of preferred stock could be
required to recognize ordinary income for tax purposes without receiving a
corresponding distribution of cash.
EXERCISE OF SECURITIES WARRANTS
Upon a holder's exercise of a securities warrant, the holder will, in
general, not recognize any income, gain or loss for federal income tax purposes,
will receive an initial tax basis in the security received equal to the sum of
the holder's tax basis in the exercised securities warrant and the exercise
price paid for such security and will have a holding period for the security
received beginning on the date of exercise.
SALE OR EXPIRATION OF SECURITIES WARRANTS
If a holder of a securities warrant sells or otherwise disposes of such
securities warrant, other than by exercise, the holder generally will recognize
capital gain or loss, long-term capital gain or loss if the
12
holder's holding period for the securities warrant exceeds twelve months on the
date of disposition. Otherwise, the holder will recognize short-term capital
gain or loss equal to the difference between the cash and fair market value of
other property received and the holder's tax basis, on the date of disposition,
in the securities warrant sold. Such a holder generally will recognize a capital
loss upon the expiration of an unexercised securities warrant equal to the
holder's tax basis in the securities warrant on the expiration date.
TAXATION OF STOCKHOLDER RIGHTS
If Redwood Trust makes a distribution of stockholder rights with respect to
its common stock, such distribution generally will be tax free and a
stockholder's basis in the rights received in such distribution will be zero. If
the fair market value of the rights on the date of issuance is 15% or more of
the value of the common stock or, if the stockholder so elects regardless of the
value of the rights, the stockholder will make an allocation between the
relative fair market values of the rights and the common stock on the date of
the issuance of the rights. On the exercise of the rights, the stockholder will
generally not recognize gain or loss. The stockholder's basis in the shares
received from the exercise of the rights will be the amount paid for the shares
plus the basis, if any, of the rights exercised. Distribution of stockholder
rights with respect to other classes of securities holders generally would be
taxable.
TAXATION OF TAX-EXEMPT ENTITIES
In general, a tax-exempt entity that is a stockholder of Redwood Trust is
not subject to tax on distributions. The Internal Revenue Service has ruled that
amounts distributed by a REIT to an exempt employees' pension trust do not
constitute unrelated trade or business income and thus should be nontaxable to
such a tax-exempt entity. Based on that ruling, but subject to the discussion of
excess inclusion income set forth under the heading "Taxation of Redwood Trust's
Stockholders," special tax counsel is of the opinion that indebtedness incurred
by Redwood Trust in connection with the acquisition of real estate assets such
as mortgage loans will not cause dividends of Redwood Trust paid to a
stockholder that is a tax-exempt entity to be unrelated trade or business
income, provided that the tax-exempt entity has not financed the acquisition of
its stock with "acquisition indebtedness" within the meaning of the Code. Under
certain conditions, however, if a tax-exempt employee pension or profit sharing
trust were to acquire more than 10% of Redwood Trust's stock, a portion of the
dividends on such stock could be treated as unrelated trade or business income.
Other tax-exempt entities should review the Code and should consult their
own tax advisors concerning application of the unrelated trade or business
income rules to them.
FOREIGN INVESTORS
The preceding discussion does not address the federal income tax
consequences to foreign investors, non-resident aliens and foreign corporations
as defined in the Code, of an investment in Redwood Trust. In general, foreign
investors will be subject to special withholding tax requirements on income and
capital gains distributions attributable to their ownership of Redwood Trust's
stock. Foreign investors in Redwood Trust should consult their own tax advisors
concerning the federal income tax consequences to them of a purchase of shares
of Redwood Trust's stock including the federal income tax treatment of
dispositions of interests in, and the receipt of distributions from, REITs by
foreign investors. In addition, federal income taxes must be withheld on certain
distributions by a REIT to foreign investors unless reduced or eliminated by an
income tax treaty between the United States and the foreign investor's country.
A foreign investor eligible for reduction or elimination of withholding must
file an appropriate form with Redwood Trust in order to claim such treatment.
PLAN OF DISTRIBUTION
We may sell securities to or through one or more underwriters or dealers
for public offering and sale, to one or more investors directly or through
agents, to existing holders of our securities directly through
13
the issuance of stockholders rights as a dividend, or through any combination of
these methods of sale. Any principal underwriter or agent involved in the offer
and sale of the securities will be named in the applicable prospectus
supplement.
The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices (any of which may represent a discount
from the prevailing market prices). We may also sell our securities from time to
time through one or more agents in ordinary brokers' transactions. Such sales
may be effected during a series of one or more pricing periods at prices related
to the prevailing market prices reported on the New York Stock Exchange, as
shall be set forth in the applicable prospectus supplement.
In connection with the sale of securities, underwriters or agents may
receive compensation from us or from purchasers of securities, for whom they may
act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concession or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution of
securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from us and any profit on the resale of
securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any principal underwriter or agent will be
identified, and any such compensation received from us will be described, in the
applicable prospectus supplement.
Unless otherwise specified in the related prospectus supplement, each class
or series of securities will be a new issue with no established trading market,
other than the common stock which is listed on the New York Stock Exchange. Any
shares of common stock sold pursuant to a prospectus supplement will also be
listed on the New York Stock Exchange, subject to official notice of issuance.
We may elect to list any future class or series of securities on an exchange,
but we are not obligated to do so. It is possible that one or more underwriters
may make a market in a future class or series of securities, but they will not
be obligated to do so and they may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of, or
the trading market for, the securities.
In connection with the offering of securities hereby, underwriters and
selling group members and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the applicable
securities. These transactions may include stabilization transactions affected
in accordance with Rule 104 of Regulation M promulgated by the SEC pursuant to
which these persons may bid for or purchase securities for the purpose of
stabilizing their market price.
The underwriters in an offering of securities may also create a "short
position" for their account by selling more securities in connection with the
offering than they are committed to purchase from us. In that case, the
underwriters could cover all or a portion of the short position by either
purchasing securities in the open market following completion of the offering of
these securities or by exercising any over-allotment option granted to them by
us. In addition, the managing underwriter may impose penalty bids under
contractual arrangements with other underwriters, which means that they can
reclaim from an underwriter, or any selling group member participating in the
offering, for the account of the other underwriters, the selling concession for
the securities that are distributed in the offering but subsequently purchased
for the account of the underwriters in the open market. Any of the transactions
described in this paragraph or comparable transactions that are described in any
accompanying prospectus supplement may result in the maintenance of the price of
the securities at a level above that which might otherwise prevail in the open
market. None of the transactions described in this paragraph or in an
accompanying prospectus supplement are required to be taken by any underwriters
and, if they are undertaken, may be discontinued at any time.
The underwriters, dealers or agents used by us in any offering of
securities under this prospectus may be customers of, including borrowers from,
engage in transactions with, and perform services for, us or one or more of our
affiliates in the ordinary course of business.
14
Underwriters, dealers, agents and other persons may be entitled, under
agreements that they may enter into with us, to indemnification against civil
liabilities, including liabilities under the Securities Act.
If indicated in the applicable prospectus supplement, we will authorize
agents and underwriters to solicit offers by institutions to purchase securities
from us at the public offering price set forth in the prospectus supplement
pursuant to delayed delivery contracts providing for payment and delivery on the
date stated in the prospectus supplement. Each contract will be for an amount
not less than, and, unless we otherwise agree, the aggregate principal amount of
securities sold pursuant to contracts shall be not less nor more than, the
respective amounts stated in the prospectus supplement. Institutions with whom
contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but shall in all cases be
subject to our approval. Contracts will not be subject to any conditions except
that the purchase by an institution of the securities covered by its contract
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which that institution is subject. A
commission indicated in the prospectus supplement will be paid to the
underwriters and agents soliciting purchases of debt securities pursuant to
contracts accepted by us.
Until the distribution of the securities is completed, rules of the SEC may
limit the ability of the underwriters and selling group members, if any, to bid
for and purchase the securities. As an exception to these rules, the
representatives of the underwriters, if any, are permitted to engage in
transactions that stabilize the price of the securities. Such transactions may
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of securities.
ERISA INVESTORS
Because the common stock will qualify as a "publicly offered security,"
employee benefit plans and individual retirement accounts may purchase shares of
common stock and treat such shares, and not the underlying assets, as plan
assets. The status of securities offered hereby other than the common stock will
be discussed in the relevant prospectus supplement. Fiduciaries of ERISA plans
should consider (i) whether an investment in the common stock and other
securities offered hereby satisfies ERISA diversification requirements, (ii)
whether the investment is in accordance with the ERISA plans' governing
instruments and (iii) whether the investment is prudent.
LEGAL MATTERS
The validity of the securities offered hereby and certain legal matters
will be passed on for us by Tobin & Tobin, a professional corporation, San
Francisco, California. Certain tax matters will be passed on by GnazzoThill, A
Professional Corporation, San Francisco, California.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1999, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission or the SEC. Our SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the SEC's
public reference facilities maintained by the Commission at Room 1204, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0300 for further information
on the public reference rooms.
15
We have filed a registration statement, of which this prospectus is a part,
covering the securities offered hereby. As allowed by SEC rules, this prospectus
does not contain all the information set forth in the registration statement and
the exhibits, financial statements and schedules thereto. We refer you to the
registration statement, the exhibits, financial statements and schedules thereto
for further information. This prospectus is qualified in its entirety by such
other information. You may request a free copy of any of the above filings by
writing or calling:
Redwood Trust, Inc.
591 Redwood Highway
Suite 3100
Mill Valley, CA 94941
(415) 389-7373
You should rely only on the information provided in this prospectus. We
have not authorized anyone else to provide you with different information. You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the cover page of this prospectus.
INCORPORATION BY REFERENCE
The Commission allows us to "incorporate by reference" information into
this prospectus, which means that we can disclose important information to you
by referring you to another document filed separately with the Commission. The
information incorporated by reference is deemed to be part of this prospectus,
except for any information superseded by information in this prospectus.
We have filed the documents listed below with the Commission under the
Securities Exchange Act of 1934 (the "Exchange Act"), and these documents are
incorporated herein by reference:
- Our Annual Report on Form 10-K for the year ended December 31, 1999;
- Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000;
- Our Current Report on Form 8-K filed January 10, 2001; and
- The description of our common stock included in our registration
statement on Form 8-A, filed July 18, 1995 (Registration No. 0-26434) and
as amended by Form 8-A/A filed August 4, 1995, under the Exchange Act.
Any documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and prior to the termination of
the offering of the securities to which this prospectus relates will
automatically be deemed to be incorporated by reference in this prospectus and
to be part hereof from the date of filing those documents. Any documents we file
pursuant to these sections of the Exchange Act after the date of the initial
registration statement that contains this prospectus and prior to the
effectiveness of the registration statement will automatically be deemed to be
incorporated by reference in this prospectus and to be part hereof from the date
of filing those documents.
Any statement contained in this prospectus or in a document incorporated by
reference shall be deemed to be modified or superseded for all purposes to the
extent that a statement contained in this prospectus or in any other document
which is also incorporated by reference modifies or supersedes that statement.
You may obtain copies of all documents which are incorporated in this prospectus
by reference (other than the exhibits to such documents unless the exhibits are
specifically incorporated herein by reference in the documents that this
prospectus incorporates by reference) without charge upon written or oral
request to Redwood Trust, Inc., 591 Redwood Highway, Suite 3100, Mil Valley, CA
94941, telephone (415) 389-7373.
16
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT OFFERING THE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
WE DO NOT CLAIM THAT THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE STATED ON THE COVER.
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REDWOOD TRUST, INC.
Common Stock
[REDWOOD LOGO]
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
March [ ], 2001
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses to be incurred in connection with the issuance and
distribution of the securities being registered are as set forth below. All such
expenses, except for the SEC registration and filing fees, are estimated:
<TABLE>
<S> <C>
SEC Registration............................................ $ 90,909.09
Legal Fees and Expenses..................................... $ 40,000.00
Accounting Fees and Expenses................................ $ 15,000.00
Printing Fees............................................... $ 40,000.00
Miscellaneous............................................... $ 4,090.91
-----------
Total.................................................. $190,000.00
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 2-418 of the Corporations and Associations Article of the Annotated
Code of Maryland provides that a Maryland corporation may indemnify any director
of the corporation and any person who, while a director of the corporation, is
or was serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, or other enterprise or employee benefit plan,
is made a party to any proceeding by reason of service in that capacity unless
it is established that the act or omission of the director was material to the
matter giving rise to the proceeding and was committed in bad faith or was the
result of active and deliberate dishonesty; or the director actually received an
improper personal benefit in money, property or services; or, in the case of any
criminal proceeding, the director had reasonable cause to believe that the act
or omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding, but if the proceeding was one by or in the right
of the corporation, indemnification may not be made in respect of any proceeding
in which the director shall have been adjudged to be liable to the corporation.
Such indemnification may not be made unless authorized for a specific proceeding
after a determination has been made, in the manner prescribed by law, that
indemnification is permissible in the circumstances because the director has met
the applicable standard of conduct. On the other hand, the director must be
indemnified for expenses if he has been successful in the defense of the
proceeding or as otherwise ordered by a court. The law prescribes the
circumstances under which the corporation may advance expenses to, or obtain
insurance or similar protection for, directors.
The law also provides for comparable indemnification for corporate officers
and agents.
The Registrant's Articles of Incorporation provide that our directors and
officers shall, and our agents in the discretion of the Board of Directors may,
be indemnified to the fullest extent required or permitted from time to time by
the laws of Maryland.
The Maryland General Corporation Law permits the charter of a Maryland
corporation to include a provision limiting the liability of our directors and
officers to the corporation and our stockholders for money damages except to the
extent that (1) it is proved that the person actually received an improper
benefit or profit in money, property or services for the amount of the benefit
or profit in money, property or services actually received, or (2) a judgment or
other final adjudication is entered in a proceeding based on a finding that the
person's action, or failure to act, was the result of active and deliberate
dishonesty and was material to the cause of action adjudicated in the
proceeding. Our Articles of Incorporation contain a provision providing for
elimination of the liability of our directors and officers or our stockholders
for money damages to the maximum extent permitted by Maryland law from time to
time.
II-1
ITEM 16. EXHIBITS.*
<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement, including forms of opinions
related thereto
5.1 Opinion of Tobin & Tobin, a professional corporation, as to
legality (including consent of such firm)
8.1 Opinion of GnazzoThill, A Professional Corporation, as to
certain tax matter (including consent of such firm)
23.1 Consent of Tobin & Tobin (see Item 5.1 above)
23.2 Consent of GnazzoThill (see Item 8.1 above)
23.3 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (set forth on signature page)
</TABLE>
- -------------------------
* Definitive exhibits with respect to specific issuances of securities (other
than shares of Common Stock issued pursuant to an underwriting agreement
substantially in the form of Exhibit 1.1) covered by this Registration
Statement will be filed by amendment or incorporated by reference from
reports filed by us pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, at the time of issuance.
** Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of the securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that the undertakings set forth in clauses (i) and (ii)
of this paragraph do not apply if the information required to be included
in a post-effective amendment is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that
are incorporated by reference in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d)
II-2
of the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(d) That,
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of San Francisco,
State of California, on March 2, 2001.
REDWOOD TRUST, INC.
By: /s/ GEORGE E. BULL III
------------------------------------
George E. Bull III
Chairman of the Board
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints George E. Bull III, Douglas B. Hansen and
Harold F. Zagunis, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Post-Effective Amendment No. 1 to Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as might or could
be done in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to Registration Statement on Form S-3 has been
signed by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<S> <C> <C>
/s/ GEORGE E. BULL III Chairman of the Board, Chief March 2, 2001
- ----------------------------------------------------- Executive Officer and Director
George E. Bull III (Principal Executive Officer)
/s/ DOUGLAS B. HANSEN President, Assistant Secretary March 2, 2001
- ----------------------------------------------------- and Director
Douglas B. Hansen
/s/ HAROLD F. ZAGUNIS Vice President, Chief Financial March 2, 2001
- ----------------------------------------------------- Officer, Treasurer, Controller
Harold F. Zagunis and Secretary (Principal
Financial Officer) (Principal
Accounting Officer)
Director March 2, 2001
- -----------------------------------------------------
Thomas C. Brown
</TABLE>
II-4
<TABLE>
<CAPTION>
SIGNATURE POSITION DATE
--------- -------- ----
<S> <C> <C>
Director March 2, 2001
- -----------------------------------------------------
Mariann Byerwalter
*/s/ THOMAS F. FARB Director March 2, 2001
- -----------------------------------------------------
Thomas F. Farb
*/s/ CHARLES J. TOENISKOETTER Director March 2, 2001
- -----------------------------------------------------
Charles J. Toeniskoetter
/s/ RICHARD D. BAUM Director March 2, 2001
- -----------------------------------------------------
Richard D. Baum
Director March 2, 2001
- -----------------------------------------------------
David L. Tyler
By: /s/ GEORGE E. BULL III
-------------------------------------------------
*George E. Bull III
Attorney-in-fact
</TABLE>
II-5
EXHIBIT INDEX*
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1** Form of Underwriting Agreement, including forms of opinions
related thereto
5.1 Opinion of Tobin & Tobin, a professional corporation, as to
legality (including consent of such firm)
8.1 Opinion of GnazzoThill, A Professional Corporation, as to
certain tax matter (including consent of such firm)
23.1 Consent of Tobin & Tobin (see Item 5.1 above)
23.2 Consent of GnazzoThill (see Item 8.1 above)
23.3 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (set forth on signature page)
</TABLE>
- -------------------------
* Definitive exhibits with respect to specific issuances of securities (other
than shares of Common Stock issued pursuant to an underwriting agreement
substantially in the form of Exhibit 1.1) covered by this Registration
Statement will be filed by amendment or incorporated by reference from
reports filed by us pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, at the time of issuance.
** Previously filed.