EXHIBIT 10.1

 

REDWOOD TRUST, INC.

PERFORMANCE STOCK UNIT AWARD AGREEMENT

 

PERFORMANCE STOCK UNIT AWARD AGREEMENT dated as of the [Date] day of [Month]
[Year] (the “Award Agreement”), by and between Redwood Trust, Inc., a Maryland
corporation (the “Company”), and [First Name] [Last Name], an employee,
consultant or non-employee director of the Company (the “Participant”).

 

Pursuant to the Redwood Trust, Inc. Amended and Restated 2014 Incentive Award
Plan (as 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 an award of Performance Stock
Units 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, as
amended to date (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
vest and 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 fifty
percent (250%) 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 to all or
substantially all holders of the outstanding shares of Common Stock with a
record date during the period beginning on the date of this Award Agreement and
ending on the applicable vesting date (such period, the “Award 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)
with respect to the Award Period.

 

             “Dividend Reinvestment Factor” shall mean, with respect to the
Company and a designated period of time, the number of shares of Common Stock
that would have been acquired from the reinvestment of cash dividends, if any,
which have been declared to all or substantially all holders of the outstanding
shares of Common Stock with a record date during such designated period of time,
with respect to one share of Common Stock outstanding on the first day of such
designated period of time.   Such number of shares shall be determined
cumulatively, for each cash dividend declared with a record date during such
designated period of time (beginning with the first such cash dividend with a
record date during such designated period of time and continuing chronologically
with each such subsequent cash dividend declared with a record date during such
designated period of time (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 such cash dividend declared with a record date during such designated
period of time 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 ex-dividend date with respect to such dividend. With respect to a Comparator
Group Company, Dividend Reinvestment Factor shall be determined in a manner
consistent with the foregoing, but in respect of such Comparator Group Company’s
common stock.

 

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.

 

 -1- 

 

 

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 [January 1, 2023], 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 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).  

 

4.Forfeiture of Performance Stock Units.   

 

(a)         Upon:

 

(i)          the Participant’s Retirement (as defined below) prior to [January
1, 2021] (or, if earlier, the expiration of the Performance Period), the Target
Shares shall be reduced on a pro-rata basis to reflect (x) the number of days of
employment completed during the period beginning on the date of this Agreement
divided by (y) 365 (or, if less, the number of days in the Performance Period),
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; or

 

(ii) the Participant’s Termination of Service as an Employee by the Company
without Cause (as defined below) prior to the expiration of the Performance
Period, the Target Shares shall be reduced on a pro-rata basis to reflect (x)
the number of days of employment completed during the period beginning on first
day of the Performance Period divided by (y) 1,095 (or, if less, the number of
days in the Performance Period), 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
Retirement on or after [January 1, 2021], 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).

 

 -2- 

 

 

For purposes of this Award Agreement, “Cause” shall have such meaning defined in
the Participant’s employment agreement with the Company or, if no such agreement
exists or does exist but does not contain such a definition, shall mean (i) the
Participant’s material failure to substantially perform the reasonable and
lawful duties of the Participant’s position for the Company, which failure shall
continue for thirty (30) days after written notice thereof by the Company to the
Participant; (ii) acts or omissions constituting gross negligence, recklessness
or willful misconduct on the Participant’s part in respect of the performance of
the Participant’s duties, the Participant’s fiduciary obligations or otherwise
relating to the business of the Company; (iii) the habitual or repeated neglect
of the Participant’s duties; (iv) the Participant’s conviction of a felony; (v)
the Participant’s 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)
the Participant’s unauthorized use or disclosure of trade secrets or
confidential or proprietary information pertaining to the Company’s business.

 

For purposes of this Award Agreement, “Retirement” shall mean a Termination of
Service due to retirement (as determined by the Committee in its sole
discretion) if such Termination of Service (i) occurs on or after the completion
by the Participant of ten (10) years of employment with the Company (which need
not be continuous) and (ii) the sum of the Participant’s age and years of
service as an Employee equals or exceeds seventy (70) (in each case measured in
years, rounded down to the nearest whole number). [Notwithstanding the
generality of the foregoing, a Termination of Service shall only constitute a
Retirement if the Participant provides the Company with at least [insert #]
months’ written notice of his or her anticipated retirement (which notice period
may be up to 12 months, based on the Participant’s position with the Company at
the time of such anticipated retirement).]

 

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 as an Employee,
Consultant or Director 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 Chief
Executive Officer or 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.

 

 -3- 

 

 

9.             Restrictive Covenants; Arbitration. The Participant agrees and
acknowledges that the Participant’s right to receive and retain the Award Shares
and any DER payments is subject to and conditioned upon the Participant’s
continued compliance with the restrictive covenants contained in Exhibit C
attached hereto. In addition, the Participant agrees and acknowledges that any
dispute arising with respect to this Award and this Award Agreement will be
subject to the Alternative Dispute Resolution provisions set forth in an
Employment and Confidentiality Agreement by and between the Participant and the
Company.

 

10.          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.

 

11.          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.  

 

12.          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.

 

13.          Withholding. The Company shall withhold, or cause to be withheld,
Award Shares or other compensation otherwise vesting or issuable under this
Award in satisfaction of any applicable withholding tax obligations. The number
of Award Shares which may be so withheld or surrendered shall be limited to the
number of Award Shares which have a fair market value on the date of withholding
no greater than the aggregate amount of such liabilities based on the maximum
individual statutory withholding rates in the Participant’s applicable
jurisdictions for federal, state, local and foreign income tax and payroll tax
purposes that are applicable to such taxable income. 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 may withhold such amounts in satisfaction of such withholding
obligations.

 

14.          Section 409A. Notwithstanding anything to the contrary in this
Award Agreement, this Award Agreement is intended to comply with Section 409A of
the Code and this Award Agreement, the Plan and the 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.
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.

 

 -4- 

 

 

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.           [First Name] [Last Name]   c/o
Redwood Trust, Inc.   One Belvedere Place, Suite 300   Mill Valley, CA  94941

 

 -5- 

 

 

Exhibit A

Performance Goals

 

Performance Period: The performance period begins on [January 1, 2020] and ends
on the earlier of (i) [December 31, 2022] 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 (the “Eligible Award
Shares”), if any, shall be determined based upon the Company’s achievement
during the Performance Period of cumulative book value total shareholder return,
relative total shareholder return and absolute total shareholder return goals,
each as further described and defined below.

 

The number of Eligible Award Shares shall be equal to the Target Shares
multiplied by the sum of:

 

(i) the percentage corresponding to the Company’s achievement of bvTSR (as
defined below) during the Performance Period, determined in accordance with the
first table below, plus

 

(ii) the rTSR Modifier (which may be negative) based on the Company’s Relative
TSR during the Performance Period, determined in accordance with the second
table below;

 

provided, however, that if the Company’s TSR for the Performance Period is less
than 0%, then the maximum number of Eligible Award Shares shall be 100% of the
Target Shares.

 

bvTSR  % of Target Shares  Less than 50% bvTSR Goal   0% 50% of bvTSR Goal   50%
100% of bvTSR Goal   100% 150% or greater of bvTSR Goal   200%

 

Relative TSR  rTSR Modifier  Less than 25th percentile   -50% 25th percentile 
 -50% 50th percentile   0% 75th percentile or greater   +50%

 

If the actual performance results fall between two goals on a table, the
percentage of Target Shares or the rTSR Modifier, as applicable, shall be
determined based on a straight-line, mathematical interpolation between the
applicable amounts. In no event shall the number of Eligible Award Shares exceed
250% of the number of Target Shares.  

 

For example, if the Company’s bvTSR during the Performance Period is 110% and
the Company’s Relative TSR during the Performance Period is at the 62.5th
percentile, then the number of Eligible Award Shares would be 145% of the number
of Target Shares (assuming that the Company’s TSR during the Performance Period
is not negative).

 

Notwithstanding the foregoing, in the event that a Change in Control occurs and
the Participant either (i) remains in continuous employment until immediately
prior to such Change in Control or (ii) experienced a Termination of Service as
an Employee prior to such 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 Participant 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 Eligible Award Shares will be
determined by reference to (i) bvTSR being deemed equal to 100% of the bvTSR
Goal and (ii) the Company’s actual Relative TSR and actual TSR achieved during
the shortened Performance Period.

 

 A-6 

 

 

For example, if a Change in Control occurs one year after the commencement date
of a Performance Period, and assuming the Company’s Relative TSR for such
then-shortened Performance Period is at the 37.5th percentile, then for purposes
of determining the number of Eligible Award Shares, bvTSR would be deemed equal
to 100% of the bvTSR Goal and the number of Eligible Award Shares would be 75%
of the number of Target Shares (assuming the Company’s TSR during such
then-shortened Performance Period is not negative).

 

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 Eligible Award Shares that become eligible for
vesting due to the Change in Control shall remain outstanding and eligible to
vest on [January 1, 2023], subject only 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
[January 1, 2023], then any Eligible 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 Eligible 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
Eligible 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.

 

Definitions:

 

“bvTSR” means the quotient, expressed as a percentage, obtained by dividing:

 

(i) the sum of:

 

(x) GAAP Book Value Per Share as of the Valuation Date, plus

 

(y) the total of all cash dividends per share of Common Stock declared to all or
substantially all holders of outstanding shares of Common Stock with a record
date during the Performance Period, minus

 

(z) GAAP Book Value Per Share as of the beginning of the Performance Period;

 

by,

 

(ii) GAAP Book Value Per Share as of the beginning of the Performance Period.

 

“bvTSR Goal” means 25%.

 

“Comparator Group Companies” means only those entities that are set forth on
Schedule I attached hereto (collectively, the “Comparator Group”); provided,
however, that if a Comparator Group Company is acquired or otherwise ceases to
have a class of equity securities that is both registered under the Securities
Exchange Act of 1934 and actively traded on a U.S. public securities market,
such Comparator Group Company will be removed from the Comparator Group.

 

“GAAP” means generally accepted accounting principles in the United States as in
effect as of an applicable date or during an applicable reporting period.

 

 A-7 

 

 

“GAAP Book Value Per Share” means, as of a specified date, book value per share
of Common Stock, as determined in accordance with GAAP, as of such specified
date (or, if such specified date does not fall on the final day of a calendar
quarter (i.e., a March 31, June 30, September 30, or December 31), then as of
the final day of the calendar quarter immediately preceding such specified date)
as calculated in accordance with the same methodology used to report GAAP book
value per share as of the final day of such calendar quarter within the
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” section of the Company’s Quarterly Report on Form 10-Q or Annual
Report on Form 10-K, as applicable, filed with the Securities and Exchange
Commission; provided that:

 

(i) to the extent there are changes in GAAP accounting principles (or the
methods of applying any of them to the Company due to a change from one
principle to another principle when there are two or more generally accepted
accounting principles that apply or when the accounting principle formerly used
is no longer generally accepted) on or subsequent to the first date of the
Performance Period (collectively, “GAAP Changes”) that result in recording, in
accordance with GAAP, one or more one-time cumulative effect adjustments to
retained earnings which, all other factors being equal, have an aggregate net
impact on GAAP Book Value Per Share as of a specified date of more than $0.10
per share, then GAAP Book Value Per Share for such specified date shall be
deemed equal to GAAP Book Value Per Share calculated as of such specified date
after reversing the aggregate net impact of such one-time cumulative effect
adjustments to retained earnings;

 

(ii) to the extent there are changes to applicable tax laws or regulations or
interpretations thereof (including the enactment or promulgations of new tax
laws, regulations, or tax accounting methodologies or changes in the
applicability of existing tax laws, regulations, or tax accounting methodologies
to the Company) on or subsequent to the first date of the Performance Period
(collectively, “Tax Changes”) that result in recording, in accordance with GAAP,
one or more one-time tax benefits or tax provisions which, all other factors
being equal, have an aggregate net impact on GAAP Book Value Per Share as of a
specified date of more than $0.10 per share, then GAAP Book Value Per Share for
such specified date shall be deemed equal to GAAP Book Value Per Share
calculated as of such specified date after reversing the aggregate net impact of
such one-time tax benefits and tax provisions;

 

(iii) to the extent there are GAAP Changes and Tax Changes subsequent to the
first date of the Performance Period that have an aggregate impact (as
determined under clauses (i) and (ii) above), all other factors being equal, on
GAAP Book Value Per Share as of a specified date of more than $0.10 per share,
then GAAP Book Value Per Share for such specified date shall be deemed equal to
GAAP Book Value Per Share calculated as of such specified date after reversing
the aggregate net impact of such one-time cumulative effect adjustments to
retained earnings and such one-time tax benefits and tax provisions; and

 

(iv) to the extent there are Acquisition-Related Accounting Items (defined
below) recorded on or subsequent to the first date of the Performance Period
that impact book value per share of Common Stock, as determined in accordance
with GAAP, as of any specified date subsequent to the first date of the
Performance Period, the GAAP Book Value Per Share for such specified date shall
be deemed equal to GAAP Book Value Per Share calculated as of such specified
date after reversing the net impact of such Acquisition-Related Accounting
Items.

 

 A-8 

 

 

“Acquisition-Related Accounting Items” shall mean any of the following relating
to business acquisitions undertaken by the Company or any of its subsidiaries:

 

(i) amortization of intangible assets recorded under the acquisition method of
accounting pursuant to ASC 805;

 

(ii) changes in the fair value of contingent consideration recorded as part of
purchase consideration under the acquisition method of accounting pursuant to
ASC 805;

 

(iii) amortization of stock-based compensation expense recorded for shares of
common stock (or other securities or similar instruments) issued in connection
with, or related to, acquisitions; and

 

(iv) other acquisition-related accounting items that are similar in nature to
any of foregoing items and/or the reversal of the impact of which would
otherwise be consistent with the foregoing, in each case as determined by the
Administrator.

 

“Good Reason” shall have such meaning defined in the Participant’s employment
agreement with the Company or, if no such agreement exists or does exist but
does not contain such a definition, shall mean the occurrence, without the
Participant’s express written consent, of any one or more of the following
events: (i) a material reduction in the Participant’s base salary or wages or a
material reduction by the Company in the value of the Participant’s total
compensation package (salary, wages, bonus opportunity, equity incentive award
opportunity and benefits) if such a reduction is not made in proportion to an
across-the-board reduction for all similarly-situated service providers of the
Company; or (ii) the relocation of the Participant’s principal Company office to
a location more than twenty-five (25) miles from its location as of the date
hereof, except for required travel on the Company’s business to the extent
necessary to fulfill the Participant’s obligations to the Company. 
Notwithstanding the foregoing, the Participant will not be deemed to have
resigned for Good Reason unless (1) the Participant provides the Company with
written notice setting forth in reasonable detail the facts and circumstances
claimed by the Participant to constitute Good Reason within ninety (90) days
after the date of the occurrence of any event that the Participant knows or
should reasonably have known to constitute Good Reason, (2) the Company fails to
cure such acts or omissions within thirty (30) days following its receipt of
such notice, and (3) the effective date of the Participant’s termination for
Good Reason occurs no later than thirty (30) days after the expiration of the
Company’s cure period.

 

“Per Share Price” means, with respect to the Company and any Comparator Group
Company, the average of the closing prices of the applicable 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
declared to all or substantially all holders of the outstanding shares of such
company’s common stock with a record date during the calculation period;
provided, however, that for purposes of calculating the Company’s 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.

 

“Qualifying Termination” means the 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 by the Participant for Good Reason.

 

“Relative TSR” means, with respect to the Performance Period, the Company’s TSR,
as a percentile with respect to the range of TSRs of each of the Comparator
Group Companies.

 

 A-9 

 

 

“TSR” means, for the Performance Period, the Company’s or a Comparator Group
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 with respect to the Performance Period,

 

by,

 

(B) the Per Share Price as of the first day of the Performance Period, which, in
the case of the Company is $[______]1, and, in the case of a Comparator Group
Company, is the amount set forth on Schedule I hereto under the heading “Initial
Per Share Price”.

 

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

 

In addition, TSR for a Comparator Group Company will be deemed to be negative
one hundred percent (-100%) if the Comparator Group Company (i) files for
bankruptcy, reorganization or liquidation under any chapter of the U.S.
Bankruptcy Code; (ii) is the subject of an involuntary bankruptcy proceeding
that is not dismissed within thirty (30) days; or (iii) is the subject of a
stockholder approved plan of liquidation or dissolution.

 

“Valuation Date” means [December 31, 2022]; provided, however, that in the event
of a Change in Control that occurs prior to [December 31, 2022], the Valuation
Date shall mean the date of the Change in Control.

 

 

1 The average of the closing prices of the Common Stock during the sixty (60)
consecutive trading days ending on the day prior to the grant date, as adjusted
to reflect any cash dividends declared with a record date during such sixty (60)
day period.

 

 A-10 

 

 

Schedule I

 

Comparator Group Companies

 

 

Comparator Group Company: Initial Per Share Price: [to be inserted] [to be
inserted]

 

 A-11 

 

 

Exhibit B

 

Deferral Election

 

[to be separately attached]

 

 

B-1

 

 

 

Exhibit C - Restrictive Covenants

 

1.Non-Disparagement. While providing services to the Company and thereafter, the
Participant agrees not to make negative comments or statements about, or
otherwise criticize or disparage, in any format or through any medium, the
Company or any entity controlled by, controlling or under common control with
the Company (“Affiliates”) or any of the officers, directors, managers,
employees, services, operations, investments or products of the Company or any
of its Affiliates. For purposes of the foregoing sentence, disparagement shall
include, but not be limited to, negative comments or statements intended or
reasonably likely to be harmful or disruptive to a person’s or entity’s
respective business, business reputation, business operations, or personal
reputation.

 

2.Non-solicitation. While providing services to the Company and, for a period of
one (1) year thereafter, the Participant shall not directly or indirectly
solicit, induce, or encourage any employee or consultant of any member of the
Company and its subsidiaries or Affiliates to terminate their employment or
other relationship with the Company and its Affiliates or to cease to render
services to any member of the Company and its subsidiaries or Affiliates and the
Participant shall not initiate discussion with any such person for any such
purpose or authorize or knowingly cooperate with the taking of any such actions
by any other individual or entity. While providing services to the Company and
thereafter, the Participant shall not use any trade secret of the Company or its
subsidiaries or Affiliates to solicit, induce, or encourage any customer,
client, vendor, or other party doing business with any member of the Company and
its subsidiaries or Affiliates to terminate its relationship therewith or
transfer its business from any member of the Company and its subsidiaries or
Affiliates and the Participant shall not initiate discussion with any such
person for any such purpose or authorize or knowingly cooperate with the taking
of any such actions by any other individual or entity.

 

3.Confidentiality. The Participant shall keep secret and retain in the strictest
confidence all confidential, proprietary and non-public matters, tangible or
intangible, of or related to the Company, its stockholders, subsidiaries,
affiliates, successors, assigns, officers, directors, attorneys, fiduciaries,
representatives, employees, licensees and agents including, without limitation,
trade secrets, business strategies and operations, seller, counterparty and
customer lists, manufacturers, vendors, material suppliers, financial
information, personnel information, legal advice and counsel obtained from
counsel, information regarding litigation, actual, pending or threatened,
research and development, identities and habits of employees and agents and
business relationships, and shall not disclose them to any person, entity or any
federal, state or local agency or authority, except as may be required by law;
provided that, in the event disclosure is sought as a result of any subpoena or
other legal process initiated against the Participant, the Participant shall
immediately give the Company’s General Counsel written notice thereof in order
to afford the Company an opportunity to contest such disclosure (such notice to
be delivered to: Redwood Trust, Inc., One Belvedere Place, Suite 300, Mill
Valley, CA, 94941, Attn: General Counsel).

 

4.Exceptions. Nothing herein shall prohibit or restrict the Participant from:
(i) making any disclosure of information required by law; (ii) providing
information to, or testifying or otherwise assisting in any investigation or
proceeding brought by, any federal or state regulatory or law enforcement agency
or legislative body, any self-regulatory organization, or the Company’s Human
Resources, Legal, or Compliance Departments; (iii) testifying, participating in
or otherwise assisting in a proceeding relating to an alleged violation of the
Sarbanes-Oxley Act of 2002, any federal, state or municipal law relating to
fraud or any rule or regulation of any self-regulatory organization; or (iv)
filing a charge with, reporting possible violations to, or participating or
cooperating with the Securities and Exchange Commission or any other federal,
state or local regulatory body or law enforcement agency (each a “Governmental
Agency”). Nothing herein shall be construed to limit the Participant’s right to
receive an award for any information provided to a Governmental Agency in
relation to any whistleblower, anti-discrimination, or anti-retaliation
provisions of federal, state or local law or regulation. In addition,
notwithstanding the foregoing obligations, pursuant to 18 U.S.C. § 1833(b), the
Participant understands and acknowledges that the Participant shall not be held
criminally or civilly liable under any U.S. federal or state trade secret law
for the disclosure of a trade secret that is made: (1) in confidence to a
federal, state, or local government official, either directly or indirectly, or
to an attorney, and solely for the purpose of reporting or investigating a
suspected violation of law; or (2) in a complaint or other document filed in a
lawsuit or other proceeding, if such filing is made under seal and protected
from public disclosure. Nothing in this Agreement is intended to conflict with
18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that
are expressly allowed by 18 U.S.C. § 1833(b).

 

 

C-1