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                                EXHIBIT 10.14.7

                               REDWOOD TRUST, INC.
                      EXECUTIVE DEFERRED COMPENSATION PLAN

        The Board of Directors of Redwood Trust, Inc. a corporation, ("Company")
has adopted this Executive Deferred Compensation Plan ("Plan") effective June 1,
2002.

        1. PURPOSE

        The primary purpose of the Plan is to provide the opportunity to defer
compensation to a select group of management, highly compensated employees and
independent directors. The plan is intended to be a top-hat plan described in
Section 201(2) of the "ERISA".

        2. DEFINITIONS AND CAPITALIZED TERMS

        The capitalized terms, set forth in alphabetical order defined below,
are used throughout the Plan.

           (a) "Annual Base Salary" refers to the term defined in Section 5.2(a)

           (b) "Annual Bonus" refers to the term defined in Section 5.2(b).

           (c) "Beneficiary" refers to the term defined in Section 8.5.

           (d) "Board" or "Board of Directors" refers to the Board of Directors
of the Company.

           (e) "Cash DERs" refers to DERs payable in cash.

           (f) "Change of Control" refers to the occurrence of any of the
following:

               (1) any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company; any trustee or other fiduciary holding
securities under an employee benefit plan of the Company; or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of Stock of the Company) becomes after the
Effective Date the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such person any securities acquired directly
from the Company or its affiliates or in one or more transactions approved or
consented to by the Board) representing 25% or more of the combined voting power
of the Company's then outstanding securities; or

               (2) during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (1), (3) or (4) of this definition)
whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof; or


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               (3) a merger or consolidation of the Company with any other
corporation is consummated, other than (A) a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in combination with
the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 55% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or

               (4) a sale or disposition by the Company of all or substantially
all of the Company's assets is consummated; or

               (5) the stockholders of the Company approve a plan of complete
liquidation of the Company.

           (g) "Code" refers to the Internal Revenue Code of 1986, as amended
from time to time.

           (h) "Committee" refers to the Company's Compensation Committee.

           (i) "Company" refers to Redwood Trust, Inc. a Maryland corporation
and any of its subsidiaries.

           (j) "Compensation" refers to Annual Base Salary, Annual Bonus, Cash
DERs, Incentive Payments, Retainers, Fees and such other bonuses and incentive
payments as may be designated by the Committee under Section 5.2(f).

           (k) "Deferral" means an amount of Compensation deferred pursuant to a
Deferral Election.

           (l) "Deferral Account" refers to the bookkeeping entries established
and maintained by the Company for the purpose of recording (i) the amounts of
Compensation deferred by a Participant, (ii) and interest and stock accruals
with respect to those amounts, and (iii) any distributions to a Participant or
Beneficiary.

           (m) "Deferral Crediting Date" refers to the term defined in Section
6.1.

           (n) "Deferral Election" means a Participant's irrevocable election to
defer receipt of Compensation to a later Plan Year.

           (o) "DERs" shall mean Dividend Equivalent Rights.

           (p) "Director" refers to any non-management director of the Board of
Directors of the Company.

           (q) "Distribution Date" means the date or dates on which Compensation
being deferred will be distributed, as selected by the Participant on the
Deferral Election form. The term Distribution Date does not include other dates
on which amounts may be distributed to a Participant under the Plan such as upon
total disability, death, Unforeseeable Financial Emergency, or termination of
employment other than upon Retirement.


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           (r) "Effective Date" refers to June 1, 2002 with respect to
Compensation first earned, determined or payable after that date.

           (s) "Employee" refers to any employee, within the meaning of Section
3121(d) of the Code, who is highly compensated, has the title of Vice President,
President or Chief Executive Officer, or is otherwise a member of management
selected by the Committee to participate in this Plan. The Committee shall
determine whether an employee is to be considered highly compensated, applying a
definition with a dollar threshold at least as high as that set under Section
401(a) of the Code from time to time with respect to qualified plans. Where the
Committee considers appropriate in applying the provisions of this Plan, the
term Employee shall include only persons who are Participants or Inactive
Participants under Plan.

           (t) "ERISA" refers the Employee Retirement Income Security Act of
1974, as amended from time to time.

           (u) "Fees" refers to meeting and other fees payable to Directors of
the Company, in addition to Retainers.

           (v) "GAAP" refers to generally accepted accounting principles,
applied on a consistent basis, stated in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants, or in statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by another entity or entities as may
be approved by a significant segment of the accounting profession.

           (w) "Inactive Participant" refers to an Employee who has elected to
defer Compensation under the Plan during a previous Plan Year but who does not
defer any Compensation payable during the current Plan Year.

           (x) "Incentive Payment" refers to any payment of the Company's Common
Stock due upon exercise of a non-qualified stock option under one of the
stock-based incentive plans of the Company.

           (y) "Interest Account" means the account under which interest is
credited to a Participant's Deferral Account each Plan Year.

           (z) "Interim Period" means with respect to any payment made to a
Participant under the Plan, the period beginning January 1 of the year in which
such payment is made and ending on the date of such payment.

           (aa) "Interim Rate of Return" is the rate that is credited on amounts
distributed from the Interest Account during a Plan Year for the period from
January 1 of such Plan Year to the date of distribution, as herein provided. The
Interim Rate of Return will be designated by the Committee for each Deferral in
the Deferral Election. In the absence of an alternative designation by the
Committee, the default Interim Rate of Return shall be 8% per annum, as
calculated on an actual daily uncompounded basis.

           (bb) "Participant" refers to an Employee or Director who elects to
defer under the Plan part or all of his or her Compensation payable during a
Plan Year.


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           (cc) "Plan" means this Redwood Trust, Inc. Executive Deferred
Compensation Plan.

           (dd) "Plan Year" refers to the period of 12 consecutive months
commencing on the first day of January of each year. The initial Plan Year shall
commence on the Effective Date of the Plan and end on the final day of December
of the same calendar year.

           (ee) "Rate of Return" is the rate of return accrued with respect to a
Plan Year on amounts held in the Interest Account at the end of such Plan Year.
A specific formula for determining the Rate of Return calculation will be
designated by the Committee for each Deferral in the Deferral Election. In the
absence of an alternative designation by the Committee, the default Rate of
Return shall be the average economic return -- as calculated annually for each
calendar year of the Company (or, in the case of the initial Plan Year, for the
period beginning July 1, 2002 and ending December 31, 2002) -- that the Company
earned as a percentage of its entire average capital base (including common,
preferred, and other forms of equity, that portion of long-term unsecured debt
that has a remaining maturity of at least one year past the end of the Plan year
and is designated as capital by the Committee, deferred amounts under this Plan,
and other forms of capital that may be designated by the Committee) before
overhead, before variable stock option expense, and before payments made to
capital (such as dividends, interest payments on debt designated as capital, and
accruals for the deferred amounts under the Plan), less 1%. In no case shall the
rate of return for a Plan year be less than 0%. The Committee shall, in good
faith, estimate a reasonable measure of the Company's average pre-overhead
marginal economic return on capital for each year by examining the Company's
results. In the absence of a different determination by the Committee, the
Company's GAAP accounting books shall be deemed an adequate estimate of economic
return and GAAP accounting numbers shall be used to calculate the Rate of Return
for the Plan. The Committee may adjust or modify the Company's GAAP results, or
use a different measure of results, in order to achieve a better reasonable
estimation of the Company's economic returns for the year (or, in the case of
the initial Plan Year, the applicable portion thereof).

           (ff) "Re-Deferral Election" means a Participant's irrevocable
election to extend a Distribution Date.

           (gg) "Retainer" refers to the annual fixed compensation amount,
payable in cash to Directors, for each fiscal year of the Company or such
portion thereof as they may serve as Directors.

           (hh) "Retirement" means a Participant's amicable termination of
employment with the Company after employment with the Company (including any
subsidiary or affiliate of the Company) for an aggregate period of not less than
ten (10) years, or as otherwise defined by the Committee.

           (ii) "Stock Equivalent Account" means the investment alternative
under which a Participant's Deferral Account is treated as if it is invested in
the Company's common stock.

           (jj) "Unforeseeable Financial Emergency" refers to the term defined
in Section 8.7.

        3. ADMINISTRATION

        The Plan shall be administered by the Committee, except as otherwise
expressly provided herein. The Committee shall have the powers set forth in the
Plan and the power to interpret its provisions. Any decisions of the Committee
shall be final and binding on all persons with regard to the Plan. The Committee
may delegate its authority hereunder to the President or any Vice President of
the Company or to such other officers of the Company as it may deem appropriate,
provided that no such officer shall be delegated authority to make decisions
with respect to his or her own Deferrals or Deferral Account.


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        4. ELIGIBILITY

        The Committee may, in writing from time to time, designate by name or
title those Employees and Directors of the Company who are eligible to
participate in the Plan for one or more Plan Years and the date upon which each
such Employee's or Director's participation my commence. All designated
Employees and Directors shall be notified in writing by the Board or the
Committee of their eligibility to participate. No Employee or Director shall be
entitled to participate in the Plan unless notified of their eligibility by the
Committee. If the Committee provides a Participant with written notice of
revocation of eligibility, the effective date of any such ineligibility shall be
the first day of the Plan Year in which the notice is received or the next
following Plan Year, as specified in the notice. A Participant's eligibility to
participate in the Plan does not confer upon the Participant any right to any
award, bonus, or other remuneration of any kind.

        5. DEFERRAL OF COMPENSATION

           5.1 Rules for Deferral Election. Any Employee or Director may make
irrevocable elections to defer receipt of their Base Salary, Annual Bonus, Cash
DERs, Incentive Payments, Retainers or Fees (each such election shall be
referred to as a "Deferral Election" and the amount deferred pursuant to such an
election the "Deferral") in accordance with the rules set forth below.

               (a) An Employee or Director shall be eligible to make a Deferral
Election only if he or she is an Employee or Director on the date such election
is made.

               (b) For each Plan Year, an Employee or Director may make no more
than one Deferral Election for each year's Annual Base Salary, Annual Bonus and
Retainer. An Employee or Director may make such number of Deferral Elections
with respect to Cash DERs, Incentive Payments, or Fees as the Committee may
prescribe.

               (c) All Deferral Elections must be made in writing on such forms
as the Committee may prescribe and must be received by the Committee no later
than the date specified by the Committee. In no event will the date specified by
the Committee with (i) respect to an Annual Base Salary or Retainer be later
than the end of the Plan Year preceding the Plan Year in which such Compensation
is anticipated to be paid or (ii) with respect to an Annual Bonus be later than
June 30 of the year the bonus is anticipated to be earned. Any Deferral Election
with respect to a Participant's Incentive Payments, Cash DERs, or Fees, shall
only apply to that portion of the foregoing remaining to be paid after the date
the Deferral Election is made.

               (d) As part of each Deferral Election, the Employee or Director
must specify the Distribution Date or Dates on which the Deferral will be paid.
The Distribution Dates specified in an Employee's or Director's Deferral
Elections may, but need not necessarily, be the same for all Deferrals. Except
as provided in subsection (g) below, each Distribution Date is irrevocable and
shall apply only to that portion of the Participant's Deferral Account which is
attributable to that Deferral.

               (e) Except for lump sum distributions at Retirement, a
Distribution Date must be May 1, so as to provide for the final audit and
reporting of performance for the prior year to be completed.


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               (f) The earliest Distribution Date selected by an Employee or
Director for any Compensation deferred under the Plan shall not be earlier than
the May 1 that occurs 16 months after the end of the Plan Year during which the
Deferral Crediting Date for such Compensation occurs.

               (g) A Participant may elect to extend the Distribution Date or
Dates and/or change the method of payment (lump sum or installments) relating to
any Deferral Election (a "Re-Deferral Election"); provided, that no Re-Deferral
Election shall be effective unless (i) the Committee receives the election prior
to the December 31 of the Plan Year preceding the Plan Year in which the first
Distribution Date to be changed occurs, and (ii) any new first Distribution Date
is at least one year later than the initial first Distribution Date or
constitutes a Distribution Date for a lump sum distribution following
Retirement. No Deferral Election may be made the subject of more than one
Re-Deferral Election to extend the Distribution Date or Dates and, in addition,
one Re-Deferral Election to change the method of payment. All Re-Deferral
Elections must be made in writing on such forms and pursuant to such rules as
the Committee may prescribe.

               (h) As part of each Deferral Election, an Employee or Director
must elect the form in which the Deferral will be paid beginning on the selected
Distribution Date. The Deferral may be paid in a single lump sum or in annual
installments over a period not exceeding fifteen years as provided under Section
8.1. Except as provided in subsection (g) above and Section 8.1, an Employee's
or Director's election as to the time and method of payment shall be
irrevocable.

               (i) As part of each Deferral Election, an Employee or Director
must elect the investment alternatives that shall apply to the Deferral in
accordance with Section 6.2.

               (j) A Deferral Election shall be irrevocable; provided, that (A)
a Participant may elect to discontinue deferral of future unaccrued Compensation
(other than Annual Bonus and Incentive Payments) at any time during the Plan
Year and (B) if the Committee determines that a Participant has an Unforeseeable
Financial Emergency (as defined in Section 5.7) and such Participant receives
distributions from his or her Deferral Account as a result thereof, then the
Participant's Deferral Elections then in effect shall be revoked with respect to
all future unaccrued Compensation (other than Annual Bonus and Incentive
Payments) covered thereby. A Participant that elects to discontinue deferrals
under (A) above will not be eligible to make a new Deferral Election with
respect to such type of Compensation until the next applicable date specified
for such type of Compensation under subsection (c) above.

               (k) Notwithstanding any provision to the contrary in this Section
5.1, a Participant may make a Deferral Election (i) with respect to unearned
Annual Base Salary or Retainer for the year 2002 no later than the 30th day
after the Effective Date of the Plan and (ii) with respect to unearned Annual
Base Salary, Annual Bonus or Retainer for the year in which the Participant
first becomes eligible to participate in the Plan, no later than the 30th day
after the date such Participant becomes eligible to participate in the Plan.

               (l) Notwithstanding any other provision of the Plan, the
Committee may refuse, in its sole discretion, to accept any Deferral Election
from a Participant regardless of such Participant's eligibility to participate
in the Plan at the time.

           5.2 Amounts Deferred. An Employee or Director may make a Deferral
Election to defer receipt of the following amounts:


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               (a) All or any portion of the Employee's Annual Base Salary.
"Annual Base Salary" shall mean the regular rate of compensation to be paid to
the Employee for services rendered during the Plan Year excluding severance or
termination payments, commissions, foreign service payments, payments for
consulting services and such other unusual or extraordinary payments as the
Committee may determine.

               (b) All or any portion of the Employee's annual bonus for a year
due under an annual bonus plan or any other short-term incentive plan of the
Company (an "Annual Bonus").

               (c) All or any portion of Cash DERs payable to the Participant.

               (d) All or any portion of Incentive Payments payable to the
Participant.

               (e) All or any portion of the Director's Retainer or Fees.

               (f) Such other payments, bonuses, and incentive payments under
any plan or arrangement established by the Company or as the Committee may
designate as compensation eligible for deferral under this Plan in such
increments and subject to such limitations and restrictions as the Committee may
establish.

        6. DEFERRAL ACCOUNTS

           6.1 Deferral Accounts. All amounts deferred pursuant to a
Participant's Deferral Elections under the Plan shall be allocated to a
bookkeeping account in the name of the Participant ("Deferral Account") and the
Committee shall maintain a separate subaccount under a Participant's Deferral
Account for each Deferral. Deferrals shall be credited to the Deferral Account
as of the Deferral Crediting Date coinciding with or next following the date on
which, in the absence of a Deferral Election, the Participant would otherwise
have received the Deferral. A "Deferral Crediting Date" shall mean the business
day coinciding with or next following the date the Compensation being deferred
would otherwise have been received by the Participant.

           6.2 Investment Alternatives. A Participant must make an investment
election at the time of each Deferral Election. The investment election must be
made in writing on such forms and pursuant to such rules as the Committee may
prescribe, subject to paragraph 6.3, and shall designate the portion of the
Deferral which is to be treated as invested in each investment alternative. The
two investment alternatives shall be as follows:

               (a) Stock Equivalent Account. Under the Stock Equivalent Account,
the value of the Participant's Deferral shall be determined as if the Deferral
were invested in the Company's common stock as of the Deferral Crediting Date.
For all Deferrals other than Deferrals of Incentive Payments, the number of
shares of common stock equivalents to be credited to the Participant's Deferral
Account and appropriate subaccounts on each Deferral Crediting Date shall be
determined by dividing the Deferral to be "invested" on that date by the closing
price of the Company's common stock on the New York Stock Exchange Composite
Transaction Tape on the business day preceding the Deferral Crediting Date
("Market Value"). Fractional stock equivalents will be computed to two decimal
places. In the case of Deferrals of Incentive Payments, the number of shares of
common stock equivalent shares to be credited to the Deferral Account shall be
the number of shares of common stock which would otherwise


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have been payable under the Incentive Payment to the Participant on or prior to
the Deferral Crediting Date but as to which the Participant has elected to defer
delivery pursuant to the terms of the Plan. An amount equal to the number of
common stock equivalents multiplied by the dividend paid per share on the
Company's common stock on each dividend record date shall be payable in cash to
the Participant on the related dividend payment date. The Participant may elect
at the time of the Deferral Election to have such amount credited to the
Interest Account. Except as the Committee may otherwise permit upon request of
the Participant, the number of shares of the Company's common stock to be paid
to a Participant on a Distribution Date with respect to any Deferral subaccount
in the Stock Equivalent Account shall be equal to the number of common stock
equivalents accumulated in the Deferral subaccount as of such Distribution Date
divided by the total number of payments remaining to be made from such Deferral
subaccount. Shares of common stock paid in respect of an Incentive Payment
Deferral shall be deemed to be issued and delivered pursuant to the incentive
plan of the Company under which such Incentive Payment was granted; all other
shares paid to Participants shall be deemed to be issued and delivered pursuant
to this Plan. All payments from the Stock Equivalent Account shall be made in
whole shares of the Company's common stock with fractional shares credited to
federal income taxes withheld.

               (b) Interest Account. Under the Interest Account, interest will
be credited to each subaccount in the Participant's Deferral Account once per
year as of each January 1 (a "Valuation Date"). The rate of interest to be
applied on each Valuation Date shall be the Rate of Return for the most recent
calendar year ended prior to such Valuation Date. The Rate of Return shall be
applied to the average balance in each subaccount during such prior fiscal year,
such average balance to be computed on an actual daily basis and excluding any
amounts distributed during such prior fiscal year to the Participant.
Calculation of the interest credits shall be made as soon as practicable
following the completion of the independent accountant's audit of the Company's
financial statements each year and the Committee's determination of the proper
Rate of Return for that year, and application of the interest credits will be
effective as of the applicable Valuation Date. Any Participant's distributions
made prior to the completion of the Committee's determination of the Rate of
Return shall be based upon the conservative estimate by the Chief Financial
Officer of the Company of the credits to be applied, if any, once the Committee
has determined the Rate of Return, and following the Committee's determination
of any adjustments necessary to reflect the proper credits will be made with the
Participant on May 1 of that year. With respect to the distribution of a
Deferral subaccount in the Interest Account, except as the Committee may
otherwise permit upon request of the Participant, the amount to be paid to the
Participant from such subaccount on a Distribution Date shall be the sum of (A)
an amount determined by dividing the balance in the subaccount as of the latest
Valuation Date (including interest accrued through the latest Valuation Date) by
the total number of payments remaining to be made from such Deferral subaccount
and (B) interest accrued during the Plan Year of distribution on the amount
determined under (A) for the Interim Period at the Interim Rate of Return. Each
lump sum payment, each installment payment and any other payment of balances in
the Participant's Interest Account shall be accompanied by an amount of accrued
interest on such payment at the Interim Rate of Return for the Interim Period.
All payments from the Interest Account shall be made in cash.

           6.3 Investment Elections and Changes. A Participant's investment
elections shall be subject to the following rules:

               (a) Except as provided in subsection (b) below with respect to
Incentive Payments that would have been paid in the form of the Company's common
stock, if


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the Participant fails to make an investment election with respect to a Deferral,
the Deferral shall be deemed to be invested in the Interest Account.

               (b) Any Deferral attributable to an Incentive Payment in the form
of the Company's common stock, restricted or otherwise, shall automatically be
deemed to be invested in the Stock Equivalent Account.

               (c) Except as provided in subsection (b) above, with respect to
the Deferrals designated in a Deferral Election but not yet deferred and
invested under the Plan, a Participant may make a one-time, irrevocable change
per Deferral Election in the investment election for all or a portion of the
Deferrals covered by such Deferral Election from the Interest Account to the
Stock Equivalent Account or from the Stock Equivalent Account to the Interest
Account by filing an investment change election with the Committee, provided
that such investment change election shall not be effective unless the election
is received by the Committee prior to the December 31 of the Plan Year preceding
the Plan Year in which the first Deferral Crediting Date with respect to such
Deferrals is set to occur.

               (d) With respect to the Deferrals designated in a Deferral
Election, a Participant may make a one-time, irrevocable per Deferral Election
to transfer all or a portion of such Deferrals invested in the Interest Account
to the Stock Equivalent Account as of the first day of any calendar quarter by
filing an investment change election with the Committee, provided that such
investment change election shall not be effective unless the election is
received by the Committee prior to the date it is to become effective and prior
to the December 31 of the Plan Year preceding the Plan Year in which the first
Distribution Date with respect to the Deferral being changed is set to occur.
The amount elected to be transferred to the Stock Equivalent Account shall be
treated as invested in the Company's common stock equivalents as of the first
day of such quarter and the number of the shares of common stock equivalents to
be credited to the Participant's Deferral Account and appropriate subaccounts as
of such date shall be determined by dividing the amount to be transferred by the
Market Value on such date.

           6.4 Vesting. Except as otherwise provided by the Committee at the
time of the Deferral Election, a Participant shall be fully vested at all times
in the balance of his Deferral Account. The Committee may condition awards of
Compensation from time to time on the Participant's consent to defer all or a
portion thereof under the Plan. The Committee may also establish vesting
requirements or other conditions with respect to awards of Compensation to be
deferred under the Plan, as specified in the Deferral Election form. For any
amounts deferred under the Plan that are subject to vesting requirements or
other conditions, the Committee shall specify how unvested balances are to be
treated under the Plan for purposes of interest accruals and dividend equivalent
payments as well as distributions of balances.

        7. EFFECT ON EMPLOYEE BENEFITS

        Amounts deferred under this Plan or distributed pursuant to the terms of
this Plan are not taken into account in the calculation of an Employee's
benefits under any employee pension or welfare benefit program or under any
other compensation practice maintained by the Company, except to the extent
provided in such program or practice.

        8. PAYMENT OF DEFERRAL ACCOUNTS

           8.1 Time of Payment. Payment of a Participant's Deferral shall be
made in a single lump sum or shall commence in installments as elected by the
Participant in the Deferral


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Election. If a Participant's Deferral Account is payable in a single lump sum,
the payment shall be made as soon as practicable following the applicable
Distribution Date. If a Participant's Deferral is payable in installment
payments, then the Participant's Deferral shall be paid in annual installments
as determined under Section 6.2 over the period as elected by the Participant in
the Deferral Election commencing as soon as practicable following the applicable
Distribution Date.

           8.2 Payment Upon Total Disability. In the event a Participant becomes
totally disabled before all amounts credited to his Deferral Account have been
paid, payment of the Participant's Deferral Account shall be made or shall
commence in the form of payment elected by the disabled Participant, provided,
that the disabled Participant requests payment in writing within 180 days of
becoming disabled. If such a request is not made, the disabled Participant's
Deferrals will be paid pursuant to such Participant's Deferral Elections and the
normal provisions of the Plan. A Participant will be considered to be totally
disabled for purposes of the Plan if the Participant is determined to be totally
disabled under the Company's disability plan applicable to the Participant.

           8.3 Payment Upon Retirement or Other Termination of Employment. A
Participant's Deferral Account shall continue to be maintained for the benefit
of the Participant and Deferrals shall be paid in accordance with the
Participant's Deferral Elections in the event the Participant retires. Following
Retirement, a Participant will continue to have the right to make Re-Deferral
Elections and investment change elections as provided herein, to the extent not
exercised prior to Retirement. If the Participant terminates employment with the
Company for any reason other than Retirement, total disability, or death before
the entire balance in the Participant's Deferral Account has been paid, the
balance in the Deferral Account shall be distributed in a single lump sum as
soon as practicable.

           8.4 Payment Upon Death of a Participant. In the event a Participant
dies before all amounts credited to his Deferral Account have been paid, payment
of the Participant's Deferral Account shall be made or shall commence in the
form of payment elected by the Participant's Beneficiary or the
Executor/Executrix of the Participant's estate, provided, that such party
submits a request in writing within 180 days of the Participant's death. If such
a request is not made, the deceased Participant's Deferrals will be paid to the
Beneficiary pursuant to such Participant's Deferral Elections and the normal
provisions of the Plan.

           8.5 Beneficiary. A Participant's Beneficiary shall mean the
individual(s) or entity designated by the Participant to receive the balance of
the Participant's Deferral Account in the event of the Participant's death prior
to the payment of his entire Deferral Account. To be effective, any Beneficiary
designation shall be filed in writing with the Committee. A Participant may
revoke an existing Beneficiary designation by filing another written Beneficiary
designation with the Committee. The latest Beneficiary designation received by
the Committee shall be controlling. In the event a married Participant
designates someone other than his or her spouse as sole, primary beneficiary,
such initial designation or subsequent change shall be invalid unless the spouse
consents in a writing which names the designated Beneficiary. If no Beneficiary
is named by a Participant or if he survives all of his named Beneficiaries, the
Deferral Account shall be paid in the following order of precedence:

               (a) the Participant's spouse or qualified domestic partner;


                                       10
<PAGE>

               (b) the Participant's children (including adopted children), per
stirpes; or

               (c) the Participant's estate.

           8.6 Form of Payment. The payment of that portion of a Deferral deemed
to be invested in the Interest Account shall be made in cash. The distribution
of that portion of a Deferral deemed to be invested in the Stock Equivalent
Account shall be distributed in whole shares of the Company's common stock with
fractional shares credited to federal income taxes withheld.

           8.7 Unforeseeable Financial Emergency. If the Committee or its
designee determines that a Participant has incurred an Unforeseeable Financial
Emergency (as defined below), the Participant may withdraw in cash and/or stock
the portion of the balance of his Deferral Account needed to satisfy the
Unforeseeable Financial Emergency, to the extent that the Unforeseeable
Financial Emergency may not be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship. An "Unforeseeable Financial Emergency" is a severe financial hardship
to the Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or of a spouse or dependent of the Participant; (ii)
loss of the Participant's property due to casualty; or (iii) such other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. A withdrawal on account of an
Unforeseeable Financial Emergency shall not exceed the amount reasonably needed
to satisfy the emergency. Withdrawals shall be paid as soon as possible
following the date on which the withdrawal is approved in writing by the
Committee setting forth the grounds therefor.

           8.8 Early Withdrawal with Penalty. Notwithstanding the other
provisions of the Plan to the contrary, a Participant may request a withdrawal
from his Deferral Account by filing a request with the Committee or its designee
in writing. Payment will be made to the Participant within five days of the
approval of such a request. Any withdrawal under this provision will be charged
with a 10 percent early withdrawal penalty which will be withheld from the
amount withdrawn.

           8.9 Withholding of Taxes. The Company shall withhold any applicable
Federal, state or local income tax from payments due under the Plan. The Company
shall also withhold any applicable Social Security taxes, including the
 Medicare portion of such taxes, and any other employment taxes as necessary
in its view based on the advice of counsel to comply with applicable laws and
the Company's standard practices.

           8.10 Small Amounts. Notwithstanding any election by a Participant
regarding the timing and manner of payment of his Deferrals, in the event of a
Participant's Retirement, death or total disability, the Employer may elect to
pay the Participant (or the Participant's Beneficiary) a lump sum distribution
of the entire value of the Participant's Deferral Account if the value of such
account is less than ten thousand dollars ($10,000) determined as of the
Valuation Date coinciding with or immediately following the Participant's
Retirement, death or total disability.

           8.11 Income Tax Obligations. If a Participant is assessed Federal,
state or local income taxes by reason of, and computed on the basis of, his or
her undistributed deferred Compensation or undistributed interest accrued on his
or her Deferral Account, the Participant shall notify the Committee in writing
of such assessment and there shall be distributed from the


                                       11
<PAGE>

Participant's Deferral Account deferred Compensation or accrued interest in an
amount equal to such tax assessment, together with any interest due and
penalties assessed thereupon within 30 days following such notice; provided
however, that if the Committee determines that such assessment is improper, it
may request that the Participant contest the assessment, at the expense of the
Company (which expense shall include all costs of appeal and litigation,
including legal and accounting fees, and any additional interest assessed on the
deficiency from and after the date of the Participant's notice to the
Committee); and during the period such contest is pending, the sums otherwise
distributable pursuant to this Section 8.11 shall not be distributed.

           8.12 Capital Changes. In the event that at any time or from time to
time a stock dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to stockholders other than
a normal cash dividend, or other change in the Company's corporate or capital
structure results in (a) the outstanding shares of common stock or any
securities exchanged therefor or received in their place being exchanged for a
different number or class of securities of the Company or of any other
corporation or (b) new, different, or additional securities of the Company or of
any other corporation being received by the holders of shares of common stock,
then the Committee, in its sole discretion, shall make such equitable
adjustments as it shall deem appropriate in the circumstances in the number and
kind of shares of stock equivalents contained in each Participant's Stock
Equivalent Account.

        9. FUNDING

        Benefits payable under the Plan to any Participant shall be paid
directly by the Company. The Company shall not fund, or otherwise segregate
assets to be used for payment of benefits under, the Plan. Participants
acknowledge that the Company intends to use the amounts deferred under this Plan
as capital.

        10. ACCOUNT STATEMENTS

        As soon as practical after May 1 of each calendar year (or after such
additional date or dates as the Committee, in its discretion, may designate),
each Participant shall be provided with a statement of the balance of his
Deferral Account hereunder as of the last day of the prior calendar year (or as
of such other dates as the Committee, in its discretion, may designate).

        11. EMPLOYMENT RIGHTS

        Establishment of the Plan shall not be construed to give any Employee
the right to be retained in the Company's service or to any benefits not
specifically provided by the Plan. An Employee's election to participate in the
Plan shall not affect the rights of the Employee under any employee agreement,
stock option, or other incentive compensation agreement or to any other benefits
to which the Employee is entitled.

        12. INTERESTS NOT TRANSFERABLE

        Except as to withholding of any tax under the laws of the United States
or any state or locality and the provisions of Section 13, no benefit payable at
any time under the plan shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, attachment or other legal process, or encumbrance
of any kind. Any attempt to alienate, whether currently or thereafter payable,
shall be void. No person shall, in any manner, be liable for or subject to the
debts or liabilities of any person entitled to such benefits. If any person
shall attempt to, or shall alienate, sell, transfer, assign, pledge or otherwise
encumber his benefits under the Plan, or if by any


                                       12
<PAGE>

reason of his bankruptcy or other event happening at any time, such benefits
would devolve upon any other person or would not be enjoyed by the person
entitled thereto under the Plan, then the Committee, in its discretion, may
terminate the interest in any such benefits of the person entitled thereto under
the Plan and hold or apply them for or to the benefit of such person entitled
thereto under the terms of this Plan or his spouse, children or other
dependents, or any of them, in such manner as the Committee may deem proper.

        13. FORFEITURE

        Unclaimed amounts shall consist of the amounts of the Deferral Account
of a Participant that are not distributed because of the Committee's inability,
after a reasonable search, to locate a Participant or his Beneficiary, as
applicable, within a period of two (2) years after the Distribution Date upon
which the payment of any benefits becomes due. No interest will be credited on
such amounts invested in the Interest Account following such Distribution Date
and no dividend equivalent payments will accrue on such amounts invested in the
Stock Equivalent Account after such Distribution Date. Unclaimed amounts shall
be forfeited at the end of such two-year period. These forfeitures will reduce
the obligations of the Company under the Plan and the Participant or
Beneficiary, as applicable, shall have no further right to his Deferral Account.

        14. CONTROLLING LAW

        This plan shall be construed in accordance with the laws of the State of
California (exclusive of its rules regarding conflicts of law) to the extent
that such laws are not preempted by ERISA or other federal laws. If any
provision of this Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of this Plan which shall
be construed as if said illegal or invalid provision had never been included.

        15. ACTION BY THE COMPANY

        Except as otherwise specifically provided herein, any action required of
or permitted by the Company under the Plan shall be by resolution of the Board
of Directors of the Company or by action of any member of the committee or
person(s) authorized by resolution of the Committee.

        16. AMENDMENT OR TERMINATION OF PLAN

           (a) The Company intends the Plan to be permanent, but reserves the
right at any time by action of its Board of Directors to terminate the Plan. The
Board of Directors may also modify or amend the Plan and outstanding Deferral
Elections, provided, however, that any such modification or amendment shall not
reduce or eliminate any Deferral Account accrued through the date of such
modification or amendment or otherwise impair the rights of a Participant under
any Deferral Elections made prior to the date of such modification or amendment
without such Participant's consent. The Committee shall have the same authority
to modify or amend the Plan and outstanding Deferral Elections as the Board of
Directors of the Company in the following circumstances:

               (i) to adopt amendments to the Plan and outstanding Deferral
Elections which the Committee determines are necessary or desirable for the Plan
and outstanding Deferral Elections to comply with or to obtain benefits or
advantages under the provisions of applicable law, regulations or rulings or
requirements of the Internal Revenue


                                       13
<PAGE>

Service or other governmental or administrative agency or changes in such law,
regulations, rulings or requirements; and

               (ii) to adopt any other procedural or cosmetic amendment that the
Committee determines to be necessary or desirable that does not materially
change benefits to Participants or their Beneficiaries or materially increase
the Company's obligations under the Plan.

           (b) The Committee shall provide notice of amendments adopted by the
Committee to the Board of Directors of the Company on a timely basis.

           (c) This Plan shall terminate immediately if a court of competent
jurisdiction determines that this Plan is not exempt from the fiduciary
provisions of Part 4 of Title I of ERISA. The Plan shall terminate as of the
date it ceased to be exempt.

           (d) This Plan shall terminate immediately upon the occurrence of a
Change of Control.

           (e) Upon termination of the Plan, the Committee shall distribute as
soon as practicable following such termination all Deferral Accounts, as
determined by the Committee in a lump sum to all Participants.

        17. MISCELLANEOUS

            17.1 Alternative Acts and Times. If it becomes impossible or
burdensome for the Company or the Committee to perform a specific act at a
specific time required by this Plan, the Company or Committee may perform such
alternative act which most nearly carries out the intent and purpose of this
Plan and may perform such required or alternative act at a time as close as
administratively feasible to the time specified in this Plan for such
performance. Nothing in the preceding sentence shall allow the Company or
Committee to accelerate or defer any payments to Participants or Inactive
Participants under this Plan, except as otherwise expressly permitted herein.

            17.2 Masculine and Feminine, Singular and Plural. Whenever used
herein, pronouns shall include both genders, and the singular shall include the
plural, and the plural shall include the singular, whenever the context shall
plainly so require.

            17.3 Notices. Any notice from the Company or the Committee to an
Employee, Participant, Inactive Participant or Beneficiary regarding this Plan
may be addressed to the last known residence of said person as indicated in the
records of the Company. Any notice to, or any service of process upon, the
Company or the Committee with respect to this Plan may be addressed as follows:

                             Chief Financial Officer
                               Redwood Trust, Inc.
                               591 Redwood Highway
                                   Suite #3100
                              Mill Valley, CA 94941

            17.4 Facility of Payment. If the Committee, in its sole discretion,
determines that any Employee, Participant, Inactive Participant or Beneficiary
by reason of infirmity,


                                       14
<PAGE>

minority or other disability, is physically, mentally or legally incapable of
giving a valid receipt for any payment due him or her or is incapable of
handling his or her own affairs and if the Committee is not aware of any legal
representative appointed on his or her behalf, then the Committee, in its sole
discretion, may direct (a) payment to or for the benefit of the Employee,
Director, Participant, Inactive Participant or Beneficiary; (b) payment to any
person or institution maintaining custody of the Employee, Director,
Participant, Inactive Participant or Beneficiary; or (c) payment to any other
person selected by the Committee to receive, manage and disburse such payment
for the benefit of the Employee, Director, Participant, Inactive Participant or
Beneficiary. The receipt by any such person of any such payment shall be a
complete acquittance therefore; and any such payment, to the extent thereof,
shall discharge the liability of the Company, the Committee, and the Plan for
any amounts owed to the Employee, Director, Participant, Inactive Participant or
Beneficiary hereunder. In the event of any controversy or uncertainty regarding
who should receive or whom the Committee should select to receive any payment
under this Plan, the Committee may seek instruction from a court of proper
jurisdiction or may place the payment (or entire Deferral Account) into such
court with final distribution to be deemed by such court.

            17.5 Correction of Errors. Any crediting of Compensation or interest
accruals to the Deferral Account of any Employee, Director, Participant,
Inactive Participant or Beneficiary under a mistake of fact or law shall be
returned to the Company. If an Employee, Director, Participant, Inactive
Participant or Beneficiary in an application for a benefit or in response to any
request by the Company or the Committee for information, makes an erroneous
statement, omits any material fact, or fails to correct any information
previously furnished incorrectly to the Company or the Committee, of if the
Committee makes an error in determining the amount payable to an Employee,
Director, Participant, Inactive Participant or Beneficiary, the Company or the
Committee may correct its error and adjust any payment on the basis of correct
facts. The amount of any overpayment or underpayment may be deducted from or
added to the next succeeding payments, as directed by the Committee. The
Committee and the Company reserve the right to maintain any action, suit or
proceeding to recover any amounts improperly or incorrectly paid to any person
under the Plan or in settlement of a claim or satisfaction of a judgment
involving the Plan.

            17.6 Status of Participants. In accordance with Revenue Procedure
92-65 Section 3.01, this Plan hereby provides:

                 (a) Employees, Directors, Participants and Inactive
Participants under this Plan shall have the status of general unsecured
creditors of the Company;

                 (b) This plan constitutes a mere promise by the Company to make
benefit payments in the future; and

                 (c) It is the intention of the parties that the arrangements
under this plan shall be unfunded for tax purposes and for purposes of Title I
of ERISA.

            17.7 Employee and Spouse Acknowledgement. By executing this Plan
document or related enrollment or election form, the undersigned Employee or
Director and, if Employee or Director is married, Employee's or Director's
spouse hereby acknowledge that each of them has read and understood this Plan
document. Employee or Director and his or her spouse also acknowledge that they
knowingly and voluntarily agree to be bound by the provisions of the Plan, as
amended from time to time, including those Plan provisions which require the
resolution of disputes by binding out-of-court arbitration. Employee or Director
and


                                       15
<PAGE>

his or her spouse further acknowledge that they have had the opportunity to
consult with counsel of their own choosing with respect to all of the financial,
tax and legal consequences of participating in this Plan, including in
particular the effects of participation of any community property or other
interest which the Employee's spouse may have in the Compensation deferred under
this Plan.

            17.8 Arbitration. Any claim or controversy between the parties which
the parties are unable to resolve themselves, including any claim arising out of
a Participant's employment or the termination of that employment, and including
any claim arising out of, connected with, or related to the formation,
interpretation, performance or breach of any provision of this Plan, and any
claim or dispute as to whether a claim is subject to arbitration, shall be
submitted to and resolved exclusively by expedited arbitration by a single
arbitrator in accordance with the following procedures:

                 (a) In the event of a claim or controversy subject to this
arbitration provision, the complaining party shall promptly send written notice
to the other party identifying the matter in dispute and the proposed remedy.
Following the giving of such notice, the parties shall meet and attempt in good
faith to resolve the matter. In the event the parties are unable to resolve the
matter within 21 days, the parties shall meet and attempt in good faith to
select a single arbitrator acceptable to both parties. If a single arbitrator is
not selected by mutual consent within 10 business days following the giving of
the written notice of dispute, an arbitrator shall be selected from a list of
nine persons each of whom shall be an attorney who is either engaged in the
active practice of law or a recognized arbitrator and who, in either event, is
experienced in serving as an arbitrator in disputes between employers and
employees, which list shall be provided by the main office of the American
Arbitration Association ("AAA") located in Marin County, California, or the
nearest office of the Federal Mediation and Conciliation Service. If, within
three business days of the parties' receipt of such list, the parties are unable
to agree upon an arbitrator from the list, then the parties shall each strike
names alternatively from the list, with the first to strike being determined by
the flip of a coin. After each party has had four strikes, the remaining name on
the list shall be the arbitrator. If such person is unable to serve for any
reason, the parties shall repeat this process until an arbitrator is selected.

                 (b) Unless the parties agree otherwise, within 60 days of the
selection of the arbitrator, a hearing shall be conducted before such arbitrator
at a time and a place in Marin County agreed upon by the parties. In the event
the parties are unable to agree upon the time or place of the arbitration, the
time and place within Marin County shall be designated by the arbitrator after
consultation with the parties. Within 30 days of the conclusion of the
arbitration hearing, the arbitrator shall issue an award, accompanied by a
written decision explaining the basis for the arbitrator's award.

                 (c) In any arbitration hereunder, the Company shall pay all
administrative fees of the arbitration and all fees of the arbitrator, except
that the Participant or Beneficiary may, if he or she wishes, pay up to one-half
of those amounts. Each party shall pay its own attorneys' fees, costs, and
expenses, unless the arbitrator orders otherwise. The prevailing party in such
arbitration, as determined by the arbitrator, and in any enforcement or other
court proceedings, shall be entitled, to the extent permitted by law, to
reimbursement from the other party for all of the prevailing party's costs
(including but not limited to the arbitrator's compensation), expenses, and
attorneys' fees. The arbitrator shall have no authority to add to or to modify
this Plan, shall apply all applicable law, and shall have no lesser and no
greater remedial authority than would a court of law resolving the same claim or
controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim
without an evidentiary hearing if


                                       16
<PAGE>

the party bringing the motion establishes that it would be entitled to summary
judgment if the matter had been pursued in court litigation. The parties shall
be entitled to reasonable discovery subject to the discretion of the arbitrator.

                 (d) The decision of the arbitrator shall be final, binding, and
non-appealable, and may be enforced as a final judgment in any court of
competent jurisdiction.

                 (e) This arbitration provision of the Plan shall extend to
claims against any parent, subsidiary, or affiliate of each party, and, when
acting within such capacity, any officer, director, shareholder, Participant,
Beneficiary, or agent of each party, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local ordinances as
well as to claims arising under the common law or under this Plan.

                 (f) Notwithstanding the foregoing, and unless otherwise agreed
between the parties, either party may, in an appropriate matter, apply to a
court for provisional relief, including a temporary restraining order or
preliminary injunction, on the ground that the arbitration award to which the
applicant may be entitled may be rendered ineffectual without provisional
relief.

                 (g) Any arbitration hereunder shall be conducted in accordance
with the employee benefit plan claims rules and procedures of the AAA then in
effect; provided, however, that (i) all evidence presented to the arbitrator
shall be in strict conformity with the legal rules of evidence, and (ii) in the
event of any inconsistency between the employee benefit plan claim rules and
procedures of the AAA and the terms of this Plan, the terms of this Plan shall
prevail.

                 (h) If any of the provisions of this Section 17.8 are
determined to be unlawful or otherwise unenforceable, in whole or in part, such
determination shall not affect the validity of the remainder of this Section
17.8, and this Section 17.8 shall be reformed to the extent necessary to carry
out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of
statutory claims, shall be resolved by neutral, binding arbitration. If a court
should find that the provisions of this Section 17.8 are not absolutely binding,
then the parties intend any arbitration decision and award to be fully
admissible in evidence in any subsequent action, given great weight by any
finder of fact, and treated as determinative to the maximum extent permitted by
law.

                 (i) Arbitration of a Disability claim under this Section 17.8
shall (i) be considered one of the two levels of mandatory appeals permitted
under Department of Labor Regulation Section 2560.503-1 and (ii) shall not
preclude the claimant from challenging the decision of the arbitrator under
Section 502(a) of ERISA.

            17.9 Performance Based Compensation. It is intended that all
Deferrals that would have qualified as performance based compensation for
purposes of Section 162(m) of the Code if paid when originally due (without
regard to the Deferral Election), and all earnings on such Deferrals that are
paid under this Plan, qualify as performance based compensation under Section
162(m) of the Code when and as actually paid in accordance with this Plan.


                                       17