Exhibit 10.1

 

REDWOOD TRUST, INC.

PERFORMANCE STOCK UNIT AWARD AGREEMENT

 

PERFORMANCE STOCK UNIT AWARD AGREEMENT dated as of the __ day of ____, 20__ (the
“Award Agreement”), by and between Redwood Trust, Inc., a Maryland corporation
(the “Company”), and ______, an employee of the Company (the “Participant”).

 

Pursuant to the Redwood Trust, Inc. 2014 Incentive Award Plan (as it may be
amended from time to time, the “Plan”), the Compensation Committee (the
“Committee”) of the Board of Directors of the Company has determined that the
Participant is to be granted a Performance Stock Unit award for shares of the
Company’s common stock, par value $0.01 per share (“Common Stock”) on the terms
and conditions set forth herein and on Exhibit A hereto (the “Award”), and the
Company hereby grants such Award.  This Award is being made in connection with a
deferral of compensation by the Participant pursuant to the Redwood Trust, Inc.
Executive Deferred Compensation Plan (the “Deferred Compensation Plan”) and the
executed Deferral Election attached hereto as Exhibit B (the “Deferral
Election”). Any capitalized terms not defined herein shall have the meaning set
forth in the Plan or the Deferred Compensation Plan, as applicable.

 

1.             Number of Performance Stock Units Awarded.   This Award Agreement
sets forth the terms and conditions of a Performance Stock Unit Award with a
target award of ______ shares of Common Stock, as the same may be adjusted to
reflect cash dividends declared on the Common Stock pursuant to Section 2 (the
“Target Shares”). The number of units representing shares of Common Stock that
shall be credited to the Participant’s Deferral Account pursuant to this Award
(the “Award Shares”) shall be determined based upon the Company’s achievement of
the Performance Goals set forth in Exhibit A hereto (the “Performance Goals”)
and may range from [zero] percent ([0]%) to [two hundred] percent ([200]%) of
the Target Shares.

 

2.             Effect of Dividends on Target Shares.   On the last day of the
Performance Period (as defined in Exhibit A) (or, in the event the Performance
Period ends due to a Change in Control, on the applicable vesting date), the
number of Target Shares set forth in Section 1 shall automatically be increased
to reflect all cash dividends, if any, which have been declared and/or paid to
all or substantially all holders of the outstanding shares of Common Stock
during the Performance Period (or, in the event the Performance Period ends due
to a Change in Control, during the period beginning on the date of this Award
Agreement and ending on the applicable vesting date) (such period, the “Dividend
Vesting Period”).  On such date, the Target Shares shall be automatically
increased by an aggregate number of shares determined by multiplying (x) the
number of Target Shares set forth in Section 1 by (y) the Dividend Reinvestment
Factor (as defined below).

 

“Dividend Reinvestment Factor” shall mean the number of shares of Common Stock
that would have been acquired from the reinvestment of cash dividends, if any,
which have been declared and/or paid to all or substantially all holders of the
outstanding shares of Common Stock during the Dividend Vesting Period, with
respect to one share of Common Stock outstanding on the first day of the
Dividend Vesting Period.   Such number of shares shall be determined
cumulatively, for each cash dividend declared and/or paid during the Dividend
Vesting Period (beginning with the first cash dividend declared and/or paid
during the Dividend Vesting Period and continuing chronologically with each
subsequent cash dividend declared and/or paid during the Dividend Vesting Period
(and in each case other than the first such cash dividend, taking into account
any increase in shares resulting from the application of this formula to the
chronologically immediately preceding cash dividend)), by multiplying (i) the
applicable number of shares of Common Stock immediately prior to the record date
of such cash dividend (which in the case of the first cash dividend paid during
the Dividend Vesting Period shall be one) by (ii) the per share amount of such
cash dividend and dividing the product by the Fair Market Value per share of
Common Stock on the payment date of such dividend (or if such payment date is
subsequent to the end of the Dividend Vesting Period, the Fair Market Value per
share of Common Stock on the last day of the Dividend Vesting Period).

 

 

 

 

Any amounts that may become payable in respect of this Section 2 shall be
treated separately from the Award Shares and the rights arising in connection
therewith for purposes of Section 409A of the Code.

 

Any calculations made pursuant to this Section 2 shall contemplate any necessary
adjustments to the number of Target Shares in accordance with Section 14.2 of
the Plan in the event of a Change in Control.

 

3.             Vesting and Payment of Award.   Except as otherwise may be
provided in Exhibit A under subclause (i) of “Vesting (Change in Control)”, the
Award Shares shall vest and be credited as of the last day of the Performance
Period, if at all, provided that the Committee determines, in its sole
discretion, whether and to what extent the Performance Goals set forth in
Exhibit A have been attained.  The crediting of the Award Shares is contingent
on the attainment of the Performance Goals as set forth on Exhibit A.  In
connection with such determination by the Committee and subject to the
provisions of the Plan and this Award Agreement (including Exhibit A), the
Participant shall be entitled to crediting of that portion of the Performance
Stock Units as corresponds to the Performance Goals attained (as determined by
the Committee in its sole discretion) as set forth on Exhibit A.

  

No Award Shares shall be credited to the Participant’s Deferral Account unless
the Committee determines, in its sole discretion, whether and to what extent the
Performance Goals set forth in Exhibit A have been attained and the number of
Award Shares earned pursuant to the Award have been determined and have vested
in accordance with the provisions of Exhibit A.  Any shares of Common Stock in
respect of Award Shares vested and credited to the Participant’s Deferral
Account shall be delivered to the Participant at the time or times provided in
the Deferral Election and the Deferred Compensation Plan (or any re-deferral
election made in accordance with Section 409A of the Code and the terms of the
Deferred Compensation Plan).  [In connection with the delivery of Award Shares
to the Participant, the Participant and the Company agree that delivery of such
Award Shares shall be net of a number of such shares which shall be forfeited by
the Participant in order to satisfy the applicable tax withholding obligation
relating to such delivery to the Participant.]

 

4.Forfeiture of Performance Stock Units.   

 

(a)         Upon (i) the Participant’s Retirement (as defined below) or (ii) the
Participant’s Termination of Service as an Employee by the Company without Cause
(as defined below), in either case, prior to the expiration of the Performance
Period, the Target Shares shall be reduced on a pro-rata basis to reflect the
number of days of employment completed during the period beginning on the date
of this Agreement and ending on [December 12, 2020], and the Award shall
continue to be eligible to vest and become payable based on such prorated number
of Target Shares and the Performance Goals in accordance with the provisions of
Exhibit A.

 

(b)         Upon the Participant’s Termination of Service as an Employee due to
death or Disability (or, if the Participant is party to an employment agreement
with the Company, in accordance with such employment agreement in the case of a
Termination of Service for “Good Reason”, as defined in such employment
agreement) prior to the expiration of the Performance Period, the Target Shares
shall not be reduced, and the Award shall continue to be eligible to vest and
become payable based on the number of Target Shares and the Performance Goals in
accordance with the provisions of Exhibit A.  

 

(c)         Upon the Participant’s Termination of Service as an Employee for any
reason other than death, Disability, Retirement, or without Cause (or, if the
Participant is party to an employment agreement with the Company, for Good
Reason), prior to expiration of the Performance Period, all Award Shares shall
become ineligible for crediting to the Participant’s Deferral Account and shall
be forfeited.  

 

(d)         Any Award Shares which have vested and been credited to the
Participant’s Deferral Account prior to (or in connection with) the
Participant’s Termination of Service as an Employee shall not be forfeited in
the event of such Termination of Service as an Employee but rather delivery of
such shares shall continue to be governed by the terms of the Deferral Election
and the Deferred Compensation Plan (or any re-deferral election made in
accordance with Section 409A of the Code and the terms of the Deferred
Compensation Plan).

 

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For purposes of this Award Agreement, “Cause” shall mean (i) the Participant’s
material failure to substantially perform the reasonable and lawful duties of
his or her position for the Company, which failure shall continue for thirty
(30) days after notice thereof by the Company to the Participant; (ii) acts or
omissions constituting gross negligence, recklessness or willful misconduct on
the part of the Participant in respect of the performance of his or her duties
hereunder, his or her fiduciary obligations or otherwise relating to the
business of the Company; (iii) the habitual or repeated neglect of his or her
duties by the Participant; (iv) the Participant’s conviction of a felony; (v)
theft or embezzlement, or attempted theft or embezzlement, of money or tangible
or intangible assets or property of the Company or its employees, customers,
clients, or others having business relations with the Company; (vi) any act of
moral turpitude by the Participant injurious to the interest, property,
operations, business or reputation of the Company; or (vii) unauthorized use or
disclosure of trade secrets or confidential or proprietary information
pertaining to Company business.

 

For purposes of this Award Agreement, “Retirement” shall mean a Termination of
Service as an Employee due to retirement (as determined by the Committee in its
sole discretion) if such Termination of Service as an Employee (i) occurs on or
after the completion by the Participant of 10 years of employment with the
Company (which employment need not be continuous), and (ii) the sum of the
Participant’s age and years of employment as an Employee equals or exceeds 70
(in each case measured in years, rounded down to the nearest whole number).

 

5.             Adjustments.   This Award and the Performance Goals shall be
subject to adjustment as set forth in this Award Agreement and the Plan.

 

6.             At-Will Employment.   This Award Agreement is not an employment
contract and nothing in this Award Agreement shall be deemed to create in any
way whatsoever any obligation of the Participant to continue in the employ or
service of the Company or on the part of the Company to continue the employment
or other service relationship of the Participant with the Company.  It is
understood and agreed to by the Participant that the Award and participation in
the Plan or the Deferred Compensation Plan does not alter the at-will nature of
the Participant’s relationship with the Company (subject to the terms of any
separate employment agreement the Participant may have with the Company).  The
at-will nature of the Participant’s relationship with the Company can only be
altered by a writing signed by both the Participant and the President of the
Company. 

 

7.             Notices.   Any notice required or permitted under this Award
Agreement shall be deemed given when delivered personally, or when deposited in
a United States Post Office, postage prepaid, addressed, as appropriate, to the
Participant either at the Participant’s address set forth below or such other
address as the Participant may designate in writing to the Company, and to the
Company:  Attention:  General Counsel, at the Company’s address or such other
address as the Company may designate in writing to the Participant.

 

8.             Failure to Enforce Not a Waiver.   The failure of the Company to
enforce at any time any provision of this Award Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.

 

9.             Existing Agreements.   This Award Agreement does not supersede
nor does it modify any existing agreements between the Participant and the
Company. [Notwithstanding the foregoing, if the Participant is a party to an
employment agreement with the Company that includes provisions relating to the
treatment of equity awards upon termination of the Participant’s employment with
the Company, then (i) the terms of this Award Agreement shall supersede the
terms of such employment agreement solely with respect to the treatment of the
Performance Stock Unit award granted hereby upon termination of the
Participant’s employment with the Company due to Retirement as defined herein;
and (ii) except as set forth on Exhibit A under “Vesting (Change in Control)”,
the terms of such employment agreement shall supersede the terms of this Award
Agreement solely with respect to the treatment of the Performance Stock Unit
award granted hereby upon termination of the Participant’s employment with the
Company for any other reason.]

 

10.          Incorporation of Plan.   The Plan and the Deferred Compensation
Plan are incorporated by reference and made a part of this Award Agreement, and
this Award Agreement is subject to all terms and conditions of the Plan and the
Deferred Compensation Plan as in effect from time to time.  Notwithstanding the
foregoing, this Award Agreement is intended to comply with Section 409A of the
Code and this Award Agreement, the Plan and Deferred Compensation Plan shall be
interpreted in a manner consistent with such intent, and any provisions of this
Award Agreement, the Plan or the Deferred Compensation Plan that would cause the
Award to fail to satisfy the requirements for an effective deferral of
compensation under Section 409A of the Code shall have no force and effect.

 

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11.          Amendments.    This Award Agreement may be amended or modified at
any time by an instrument in writing signed by the parties
hereto.  Notwithstanding the foregoing, the Deferral Election shall be
irrevocable and the dates specified for distribution of vested Award Shares may
not be modified after the date hereof except as otherwise permitted under
Section 409A of the Code.

 

12.          Withholding. To the extent that any Federal Insurance Contributions
Act tax withholding obligations arise in connection with the Award prior to the
applicable vesting date, the Administrator shall accelerate the payment of a
portion of the Award sufficient to satisfy (but not in excess of) such tax
withholding obligations and any tax withholding obligations associated with any
such accelerated payment, and the Administrator shall withhold such amounts in
satisfaction of such withholding obligations.

 

13.          Section 409A. Notwithstanding anything to the contrary in this
Award Agreement, no amounts shall be paid to the Participant under this Award
Agreement during the six (6)-month period following the Participant’s
“separation from service” (within the meaning of Section 409A of the Code) to
the extent that the Administrator determines that the Participant is a
“specified employee” (within the meaning of Section 409A of the Code) at the
time of such separation from service and that paying such amounts at the time or
times indicated in this Award Agreement would be a prohibited distribution under
Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is
delayed as a result of the previous sentence, then on the first business day
following the end of such six (6)-month period (or such earlier date upon which
such amount can be paid under Section 409A of the Code without being subject to
such additional taxes), the Company shall pay to the Participant in a lump-sum
all amounts that would have otherwise been payable to the Participant during
such six (6)-month period under this Award Agreement.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties have executed this Award Agreement on the day
and year first above written.

 

  REDWOOD TRUST, INC.         By:         Andrew P. Stone     General Counsel &
Corporate Secretary     One Belvedere Place, Suite 300     Mill Valley,
CA  94941         The undersigned hereby accepts and agrees to all the terms and
provisions of this Award Agreement and to all the terms and provisions of the
Plan herein incorporated by reference.           [Insert Participant Name]   c/o
Redwood Trust, Inc.   One Belvedere Place, Suite 300   Mill Valley, CA  94941

 

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Exhibit A

Performance Goals

 

Performance Period: The performance period begins on [December 13, 2017] and
ends on the earlier of (i) [December 12, 2020] or (ii) the date of consummation
of a Change in Control (the “Performance Period”).

 

Performance Goals: The number of Award Shares which will be eligible for vesting
and crediting to the Participant’s Deferral Account, if any, shall be determined
based upon the Company’s cumulative total shareholder return (“TSR”, as defined
below) for the Performance Period in accordance with the following schedule:

 

Total Shareholder Return Goal
(“TSR Goal”)  % of Target Shares Creditable  Less than [0]%   [0]% [25]% 
 [100]% [125]% or greater   [200]%

 

If the actual performance results fall between [0]% and [25]% TSR, or between
[25]% and 125]% TSR, the actual number of Award Shares shall be determined based
on a straight-line, mathematical interpolation between the applicable
percentages. In no event shall the number of Award Shares exceed [200]% of the
number of Target Shares.  In the event the TSR is equal to or less than [0]% at
the end of the Performance Period, all Award Shares shall become ineligible for
crediting to the Participant’s Deferral Account and shall be forfeited.

 

Notwithstanding the foregoing paragraph, in the event that a Change in Control
occurs and the Participant either remains in continuous employment until
immediately prior to a Change in Control or experiences a Termination of Service
as an Employee prior to a Change in Control and the Award Shares are not subject
to forfeiture in connection with such termination under Section 4(c) of this
Award Agreement (including without limitation in connection with a Termination
of Service by the Participation for Good Reason in accordance with the
Participant’s employment agreement), then the Performance Period will end upon
such Change in Control, and the number of Award Shares will be determined by
reference to the TSR Goal, pro-rated on an annualized basis to reflect the
shortened Performance Period.

 

For example, if a Change in Control occurs one year after the commencement date
of a Performance Period, then the TSR Goal to earn [100]% of the Target Shares
would equal [7.72]% and the TSR Goal to earn [200]% of the Target Shares for
such tranche would equal [31.04]%.

 

Vesting (Change in Control): If the Performance Period ends due to the
occurrence of a Change in Control and:

 

(i)the Participant remains in continuous employment until the date of such
Change in Control, then any Award Shares that become eligible for vesting due to
the Change in Control shall remain outstanding and eligible to vest and be
credited to the Participant’s Deferral Account on [December 12, 2020], subject
to continued employment through such date. However, if the Participant
experiences a Qualifying Termination (as defined below) upon or following such
Change in Control but prior to or on [December 12, 2020], then any Award Shares
shall vest and be credited to the Participant’s Deferral Account as of such
termination; or

 

(ii)the Participant experienced a Termination of Service as an Employee, prior
to the date of the Change in Control, due to death, Disability, Retirement,
without Cause, or, if the Participant is party to an employment agreement with
the Company, for Good Reason, in any case, then any Award Shares that become
eligible for vesting due to the Change in Control shall vest immediately prior
to such Change in Control and shall be credited to the Participant’s Deferral
Account on the date of such Change in Control.

 

Notwithstanding the foregoing, in the event that a successor corporation in a
Change in Control refuses to assume or substitute for the Award, then any Award
Shares that become eligible for vesting due to the Change in Control shall vest
immediately prior to such Change in Control and shall be credited to the
Participant’s Deferral Account on the date of such Change in Control.

 

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Definitions:

 

“TSR” shall mean, for the Performance Period, the Company’s cumulative total
shareholder return (rounded to the nearest hundredth), expressed as a percentage
determined as the quotient obtained by dividing:

 

(A) the sum of:

 

(x) the Per Share Price as of the Valuation Date, plus

 

(y) the Per Share Price as of the Valuation Date multiplied by the Dividend
Reinvestment Factor,

 

by,

 

(B) $______ [The average of the closing prices of the Company’s Common Stock
during the sixty (60) consecutive trading days ending on the day prior to the
grant date]

 

Notwithstanding the foregoing, the Committee shall make appropriate adjustments
in calculating TSR to reflect any dividends which may be declared during the
sixty (60) consecutive trading days prior to the end of the Performance Period,
as determined by the Committee in its sole discretion.  

 

“Per Share Price” shall mean the average of the closing prices of the Company’s
Common Stock during the sixty (60) consecutive trading days ending on the day
prior to the Valuation Date, adjusted to reflect the reinvestment of any cash
dividends paid to all or substantially all holders of the outstanding shares of
Common Stock during the calculation period; provided, however, that for purposes
of calculating the Per Share Price in the event of a Change in Control, the Per
Share Price shall be the price per share of Common Stock paid in connection with
such Change in Control or, to the extent that the consideration in the Change in
Control transaction is paid in stock of the acquiror or its affiliate, then,
unless otherwise determined by the Administrator (including in connection with
valuing any shares that are not publicly traded), Per Share Price shall mean the
value of the consideration paid per share of Common Stock based on the average
of the closing trading prices of a share of such acquiror stock on the principal
exchange on which such shares are then traded for each trading day during the
five consecutive trading days ending on and including the date on which a Change
in Control occurs.

 

“Valuation Date” means [December 12, 2020]; provided, however, that in the event
of a Change in Control that occurs prior to [December 12, 2020], the Valuation
Date shall mean the date of the Change in Control.

 

“Qualifying Termination” means a Participant’s Termination of Service as an
Employee (i) due to the Participant’s death, Disability or Retirement or (ii)
upon or within 24 months following a Change in Control, either by the Company
without Cause or, if the Participant is party to an employment agreement with
the Company, by the Participant for Good Reason.

 

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Exhibit B

Deferral Election

 

[Attached]

 

 

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