Exhibit 10.3


 


REDWOOD TRUST, INC. 


[FORM OF] 


PERFORMANCE STOCK UNIT AWARD AGREEMENT


 


PERFORMANCE STOCK UNIT
AWARD AGREEMENT dated as of the [15th day of December 2022] (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”). References to the Company herein shall include
the subsidiaries and Affiliates (as defined in Exhibit B).


 


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.   Any capitalized terms not defined herein shall have the meaning set forth in the Plan.


 


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 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 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 Change in Control 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 last day of the Performance Period (or Change in Control date, as applicable) (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-	 



     


    

 


In addition, in accordance
with Section 10.4 of the Plan, following the end of the Performance Period (including if the Performance Period ends upon a Change
in Control), the Participant will be entitled to a Dividend Equivalent (each, a “DER”) for each earned Award Share, pursuant
to which the Participant will be entitled to receive, pursuant to the Plan, an amount equal to the aggregate regular cash dividends with
a record date occurring after the final date of the Performance Period (or Change in Control date, as applicable) and prior to the delivery
and payment date of the Award Share that would have been payable to the Participant with respect to the share of Common Stock underlying
the Award Share had it been outstanding on the applicable record date. DERs shall remain outstanding from the final date of the Performance
Period (or Change in Control date, as applicable) until the earlier of the payment / delivery or forfeiture of the underlying Award Share,
at which point, the corresponding DER will be forfeited. Any DER amounts that may become payable in respect of this paragraph shall be
paid as and when the dividends in respect of which such DER payments arise are paid to holders of Common Stock, without regard to the
vested status of the underlying Award Share. Any DER amounts that may become payable in respect of this paragraph shall be treated separately
from the Award Shares and the rights arising in connection therewith for purposes of Section 409A of the Code


 


3.            Vesting
and Payment/Delivery of Award.   Except as otherwise may be provided in Exhibit A under subclause (i) of
 “Vesting (Change in Control)”, the Award Shares shall vest as of [January 1, 2026], 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.  
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 vesting 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.


 


The Company shall pay and
deliver to the Participant the Award Shares, to the extent vested, (i) within 45 days following [April 1, 2026] or (ii) within
45 days following any vesting that occurs under the terms of paragraph (a)(ii) or paragraph (b) of the section captioned “Vesting
(Change in Control)” within Exhibit A, whichever is earlier, subject to withholding in accordance with Section 13. Notwithstanding
anything to the contrary contained herein, the exact delivery / payment date of any Award Shares shall be determined by the Company in
its sole discretion (and the Participant shall not have a right to designate the time of delivery / payment).


 


 4.            Forfeiture of Performance Stock Units.




 


(a)           Upon:


 


(i)            the
Participant’s Retirement (as defined below) prior to [January 1, 2024] (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) [365/366] (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) [1,095/1,096] (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, 2024], 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.  Notwithstanding
anything herein or in the Plan, for purposes of this Award Agreement, a “Disability” shall only exist if the Participant
is “disabled” within the meaning of Section 409A of the Code.


 






    	 	-2-	 



     


    

 


(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 be forfeited.


 


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 failure to competently perform the Participant’s
job or duties to the Company, as reasonably determined by the Company, which failure shall continue for thirty (30) days after written
notice thereof by the Company to the Participant; (b) any act of negligence or misconduct by the Participant that has had or is reasonably
likely to have an adverse effect on, or has injured or harmed or is reasonably likely to injure or harm, the Company or any of its business
affairs, reputation, counterparties, employees, agents or vendors; (c) the Participant’s breach of any fiduciary duty or obligation
to the Company; (d) (A) the Participant’s breach of any Company policy (including any code of conduct or harassment policies),
which is reasonably likely to have an adverse effect on, or has injured or harmed or is reasonably likely to injure or harm, the Company
or (B) any breach by the Participant of an agreement with the Company; (e) the Participant’s commission of, indictment
for, or plea of nolo contendere to, a felony or any other crime involving moral turpitude; (f) the Participant’s theft, misappropriation,
or embezzlement, or attempted theft, misappropriation, or embezzlement, of money or tangible or intangible assets or property of the Company
or any of its employees, customers, clients, or others having business relations with any of them; (g) any act of moral turpitude,
dishonesty, or similar behavior by the Participant injurious to the interests, property, operations, business or reputation of the Company;
or (h) the Participant’s unauthorized use or disclosure of trade secrets or confidential or proprietary information of the
Company or pertaining to any of its business or operations.


 


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 12 months’ written notice of his or her
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 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.


 






    	 	-3-	 



     


    

 


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


 


9.            Restrictive
Covenants; Arbitration. The Participant agrees and acknowledges that the Participant’s right to receive 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 B 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 (or any other arbitration or alternative dispute resolution provisions or agreements) 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 is 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 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.


 


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.


 


14.          Section 409A.
Notwithstanding anything to the contrary contained in this Award Agreement, this Award Agreement is intended to comply with or be exempt
from Section 409A of the Code and this Award Agreement and the Plan shall be interpreted in a manner consistent with such intent,
and any provisions of this Award Agreement or the Plan that would cause the Award to fail to be exempt from or to satisfy the requirements
for an effective deferral of compensation under Section 409A of the Code shall have no force and effect. Any right under this Award
Agreement to a series of installment payments shall be treated as a right to a series of separate payments. Notwithstanding anything
to the contrary in this Award Agreement, no amounts shall be paid to the Participant under this Award Agreement during the six (6)-month
period following the Participant’s “separation from service” (within the meaning of Section 409A of the Code)
to the extent that the Administrator determines that the Participant is a “specified employee” (within the meaning of Section 409A
of the Code) at the time of such separation from service and that paying such amounts at the time or times indicated in this Award Agreement
would be a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code. If the payment of any such amounts is delayed
as a result of the previous sentence, then on the first business day following the end of such six (6)-month period (or such earlier
date upon which such amount can be paid under Section 409A of the Code without being subject to such additional taxes), the Company
shall pay to the Participant in a lump-sum all amounts that would have otherwise been payable to the Participant during such six (6)-month
period under this Award Agreement.


 


[Signature page follows...]


 






    	 	-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]
	 	 	[Chief Legal Officer]
	 	 	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 period beginning on [January 1, 2023] and ending on the earlier of (i) [December 31, 2025] 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 (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, cumulative relative
total shareholder return and cumulative absolute total shareholder return goals during the Performance Period, each as further described
and defined below.


 


The number of Eligible Award Shares (prior to
the application of any Dividend Reinvestment Factor) shall be equal to sum of:


 


(i) two-thirds of the
total number of Target Shares multiplied by the bvTSR Vesting Percentage, plus


 


(ii) one-third of the
total number of Target Shares multiplied by the rTSR Vesting Percentage;


 


provided, however, that if the Company’s
TSR (as defined below) for the Performance Period is less than 0%, then the maximum number of Eligible Award Shares shall be 100% of the
Target Shares (prior to the application of any Dividend Reinvestment Factor); and provided further that, in no event shall the number
of Eligible Award Shares exceed 250% or be less than 0% of the Target Shares (prior to the application of any Dividend Reinvestment Factor).


 


The “bvTSR Vesting Percentage”
shall be the percentage amount corresponding to the Company’s achievement of bvTSR (as defined below) during the Performance Period,
determined in accordance with the table below:


 


	bvTSR	 	bvTSR Vesting Percentage	 
	Less than 50% of bvTSR Goal	 	 	0	%
	50% of bvTSR Goal	 	 	50	%
	100% of bvTSR Goal	 	 	100	%
	150% or greater of bvTSR Goal	 	 	250	%



 


If the bvTSR performance results fall between two goals in the table
above, the bvTSR Vesting Percentage shall be determined based on a straight-line, mathematical interpolation between the applicable amounts.


 


The “rTSR Vesting Percentage”
shall be the percentage amount corresponding to the Company’s achievement of rTSR (as defined below) during the Performance Period,
determined in accordance with the table below:


 


	rTSR	 	rTSR Vesting Percentage	 
	Less than 27.5th percentile	 	 	0	%
	27.5th percentile	 	 	50	%
	55th percentile	 	 	100	%
	82.5th percentile or greater	 	 	250	%



 


If the rTSR performance results fall between two goals on the table
above, the rTSR Vesting Percentage shall be determined based on a straight-line, mathematical interpolation between the applicable amounts.


 


For example, if (i) this Award covers 99
Target Shares, (ii) the Company’s bvTSR during the Performance Period was 110% of the bvTSR Goal, and (iii) the Company’s
rTSR during the Performance Period was at the 68.75th percentile, then the number of Eligible Award Shares would be equal
to (130% of 66) plus (175% of 33), or 143.55 (assuming that the Company’s TSR achieved during the Performance Period was not negative),
prior to the application of any Dividend Reinvestment Factor.


 






    A-1 


     


    

 


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 Relative TSR and TSR achieved during
the shortened Performance Period.


 


For example, if (i) this Award covers 99
Target Shares, (ii) a Change in Control occurred one year after the commencement date of a Performance Period, and (iii) the
Company’s Relative TSR for such then-shortened Performance Period was at the 41.25th 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 equal to (100% of 66) plus (75% of 33), or 90.75 (assuming the Company’s TSR acheived during such then-shortened
Performance Period is not negative), prior to the application of any Dividend Reinvestment Factor.


 


Vesting (Change in Control):


 


(a) 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,
2026], 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, 2026], then any Eligible Award Shares shall vest as
of immediately prior to 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, or 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.



 


(b) 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.


 


Definitions:


 


“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.


 






    A-2 


     


    

 


“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, or, in the event of an acquisition or Bankruptcy Event (as defined below), shall be
deemed to have the Per Share Price as of such acquisition or Bankruptcy Event as set forth herein.


 


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


 


“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;


 






    A-3 


     


    

 


(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 above) 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.


 


“Good Reason” shall
have such meaning defined in the Participant’s employment agreement with the Company. Following a Change in Control, if no such
agreement exists or does exist but does not contain such a definition, “Good Reason” shall mean the occurrence of any one
or more of the following events, without the Participant’s prior written consent: (i) a material reduction (at the direction
of the Company) in the value of the Participant’s total compensation package (salary, wages, bonus opportunity, equity or other
long-term incentive award opportunities, and benefits) if such a reduction is not linked to the performance of the Company or one or more
of its business units or subsidiaries or made in proportion to an across-the-board reduction for all similarly-situated employees of the
Company or the applicable business unit or employing subsidiary; or (ii) the relocation of the Participant’s principal Company
office to a location more than 25 miles from its location as of the date of the Participant’s Participation Notice, except for required
travel on the Company’s business to the extent necessary to fulfill the Participant’s obligations to the Company or any of
its subsidiaries or affiliates.  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 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 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 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 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” or “rTSR”
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-4 


     


    

 


“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 “Designated
Initial Share Price” as of the first day of the Performance Period, as defined and set forth on Schedule I hereto with
respect to the Company and each of the Comparator Group Companies under the heading “Designated Initial 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 (the
preceding clauses (i) through (iii) being collectively referred to herein as “Bankruptcy Events”).


 


“Valuation Date” means
[December 31, 2025]; provided, however, that in the event of a Change in Control that occurs prior to [December 31, 2025], the
Valuation Date shall mean the date of the Change in Control.


 






    A-5 


     


    

 


Schedule
I


 


Comparator
Group Companies


 


The “Designated Initial Share Price”
for the Company and each of the Comparator Group Companies listed below, as of the first day of the Performance Period, is the average
of the closing prices of the applicable company’s common stock during the sixty (60) consecutive trading days beginning on the first
trading day in the Performance Period, adjusted to reflect 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 such 60-trading day period.


 


The Company and the Participant agree that upon
the availability of the Designated Initial Share Price for the Company and each of the Comparator Group Companies listed below, a replacement
for this Schedule I shall be attached to this Award Agreement that inserts each of the Designated Initial Share Prices in the spaces provided
below.


 


	Company:	Designated Initial
                                            Share Price:
	Redwood Trust, Inc. (RWT)	[to
be inserted when available]
	 	 
	Comparator Group Company:	Designated Initial Share Price:
	[list of companies to be inserted at grant]	[to
be inserted when available]



 






    A-6 


     


    

 


Exhibit B
- 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 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 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 confidential information or trade secret of
the Company or its subsidiaries or Affiliates to solicit, induce, or encourage any customer of, client of, vendor of, or other party doing
business with any of the Company and its subsidiaries or Affiliates to terminate its relationship therewith or transfer its business from
any 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 Chief Legal Officer 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: Chief Legal Officer).



 


		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).



 


* * *


 






    	 	B-1	 



     


    

 


It is expressly agreed by Participant that each
breach of the restrictive covenants set forth in this Exhibit A is a distinct and material breach of the attached Award Agreement
and that solely a monetary remedy would be inadequate, impracticable and extremely difficult to prove, and that each such breach would
cause the Company irreparable harm. It is further agreed that, notwithstanding any other terms of the attached Award Agreement, in addition
to any and all remedies available at law or equity (including money damages), the Company shall be entitled to temporary and permanent
injunctive relief to enforce the restrictive covenants set forth in this Exhibit A, without the necessity of proving actual damages.
It is further agreed that the Company shall be entitled to seek such equitable relief in any forum, including a court of law, notwithstanding
the provisions of any arbitration or other alternative dispute resolution provisions or agreement between the undersigned and the Company.
The Participant further agrees that, in addition to any other remedy which may be available at law or in equity, the Company will be entitled
to specific performance and injunctive relief without the requirement to post any bond. The Company may pursue any of the remedies described
herein concurrently or consecutively in any order as to any such breach or violation, and the pursuit of one of such remedies at any time
will not be deemed an election of remedies or waiver of the right to pursue any of the other such remedies.


 


The Participant understands that the restrictive
covenants and other terms set forth in this Exhibit A are intended to protect the Company’s (and its subsidiaries’ and
affiliates’) established employee, customer, client, and/or counterparty relations, and the general goodwill of the business of
the Company and its subsidiaries and affiliates. The Participant and the Company agree that the covenants set forth in this Exhibit A
are reasonable with respect to duration, geographical area, and scope. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Exhibit A is invalid or unenforceable, the parties agree that the court making the determination
of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific
words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Exhibit A shall be
enforceable as so modified after the expiration of the time within which the judgment may be appealed.


 






    	 	B-2