Unassociated Document


    Exhibit
10.3

    


    


    


    


    March 17,
2010

    


    George E.
Bull, III

    c/o
Redwood Trust, Inc.

    One
Belvedere Place

    Mill
Valley, CA 94941

    


    Re: Transition Agreement

    


    Dear
George:

    


    This
letter agreement (the “Agreement”) confirms
the agreement between you and Redwood Trust, Inc. (the “Company”) with
respect to your retirement and transition from serving as an officer of the
Company to serving solely as a non-employee member of the Board of Directors of
the Company (the “Board”).   This
Agreement also serves to amend the terms and conditions of certain outstanding
stock options and deferred stock awards granted to you pursuant to the 2002
Redwood Trust, Inc. Incentive Plan (formerly the 2002 Redwood Trust, Inc.
Incentive Stock Plan) to reflect your transition to non-employee
director.

    


    You
acknowledge and agree that you will resign from your position as Chief Executive
Officer of the Company effective as of 11:59 pm Pacific Standard Time on May 18,
2010, and that you will retire from employment with the Company effective as of
11:59 pm Pacific Standard Time on June 1, 2010.  Such retirement shall
constitute a termination of your employment pursuant to Section 6(e) of that
certain Employment Agreement dated April 7, 2003, by and between you and the
Company, as amended.  Following your transition, you will be eligible
to participate in any retiree medical benefit plan or programs of the
Company  that are in effect at the time of your retirement, in each
case in accordance with the terms of such plans or programs.

    


    Through
the date of your retirement on June 1, 2010, the Company will continue to
provide you with your base salary and standard employee benefits.  You
will be eligible to receive a 2010 annual bonus, pro rated based on the number
of full calendar months of employment completed during 2010.  The
actual amount of your 2010 annual bonus will be determined by the Compensation
Committee at the end of the 2010 compensation cycle based on a process
consistent with that applied to non-retiring members of senior management (with
the current expectation that such bonus will be determined based on the
Committee’s year-end evaluation of your personal performance and the Committee’s
year-end determination of the Company performance component of annual bonuses
and pro rated based on five full calendar months of employment during
2010).  Your 2010 annual bonus will be payable at the same time annual
bonuses for 2010 are otherwise payable to non-retiring members of senior
management.

    


    You will
not be eligible to receive an executive equity incentive grant at the end of
2010 for your service as Chief Executive Officer during a portion of
2010.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      Mr.
George E. Bull, III

      March 17,
2010

      Page 2 of
4

    

     

    Although
you will not be eligible to receive an executive equity incentive grant at the
end of 2010, you will be eligible to receive an annual director equity grant in
May 2010 equal to that awarded to other non-employee members of the Board at
that time, but pro rated to reflect the fact that between the date of that grant
in May 2010 and June 1, 2010 you will not be a non-employee
director.  You will also be entitled to continued indemnification
protection by the Company with respect to your service as a director and as an
officer of the Company.

    


    Exhibit A
attached hereto sets forth each outstanding Stock Option Grant (the “Options”) and each
Deferred Stock Award Agreement (“Deferred Stock
Awards,” and together with the Options, the “Awards”) which the
Company has previously granted to you.

    


    Deferred
Stock Awards.

    


    This
Agreement serves to amend the vesting provisions of your Deferred Stock Awards
to reflect your transition to a role as a non-employee member of the
Board.  Accordingly, the Deferred Stock Award that was granted to you
on December 9, 2009 (the “2009 Award”) is
hereby amended to provide that, effective upon your retirement as an employee on
June 1, 2010, such award shall become fully vested with respect to 71,445 shares
and the remainder of the shares subject to the 2009 Award shall be
forfeited.  Additionally, each Deferred Stock Award other than the
2009 Award is hereby amended, effective upon your retirement as an employee on
June 1, 2010, to provide that it shall become fully vested effective on June 1,
2010.

    


    In
particular, Section 3 of the 2009 Award is hereby amended to provide that,
effective upon your retirement as an employee on June 1, 2010, the award is
vested with respect to 71,445 Award Shares (as such term is defined in the
Deferred Stock Agreements) and the remainder of the Award Shares subject to the
2009 Award are forfeited.  Section 3 of each Deferred Stock Agreement,
other than the 2009 Award, is hereby amended to provide that, effective upon
your retirement as an employee on June 1, 2010, all unvested Award Shares (as
such term is defined in the applicable Deferred Stock Agreements) are fully
vested as of June 1, 2010.

    


    For the
avoidance of doubt, for purposes of the Deferred Stock Agreements (other than
the 2009 Award) and the Company’s Executive Deferred Compensation Plan, your
termination of employment with the Company shall constitute a “Retirement.” All
Award Shares shall continue to be delivered at the time or times provided in
their respective Deferred Stock Election Forms and in accordance with the terms
of the Company’s Executive Deferred Compensation Plan.  In particular,
and without limitation of the foregoing, consistent with the terms of the award,
the delivery of the Award Shares underlying the Deferred Stock Award that was
granted to you on February 25, 2010 as part of your 2009 annual bonus, will be
deferred until a time not earlier than May 1, 2012.

    


    Options.

    


    This
Agreement also serves to amend the provisions of your outstanding Options to
reflect your transition to a role as a non-employee member of the
Board.  Accordingly, each Option is hereby amended to provide that,
effective upon your retirement as an employee on June 1, 2010, the Option shall
remain exercisable through, and for a period of time following, the termination
of your relationship with the Company as a director, to the extent each is then
vested; provided,
however, that in no event shall an Option be exercisable beyond its
original expiration date.  In particular, Sections 7 and 8 of each
Option agreement are hereby amended, as applicable, to provide that, effective
upon your retirement as an employee on June 1, 2010, any reference to
“Optionee’s relationship as an employee” shall mean “Optionee’s relationship as
a director” and any reference to “employment” shall mean “service as a
director.” Similarly, Section 9 of each Option agreement is hereby amended, as
applicable, to provide that, effective upon your retirement as an employee on
June 1, 2010, any reference to “relationship as an employee” with the phrase
“relationship as a director” and any reference to “employment” shall mean
“service as a director.”  Notwithstanding the foregoing, however, the
Options numbered 2338, 2347, 1841 and 2011 on Exhibit A are hereby amended to
provide that they shall remain exercisable through the later of (i) June 1, 2013
and (ii) (a) twelve months following the termination of your relationship as a
director with the Company by reason of death or disability (as determined
pursuant to Sections 7 and 8 of the applicable Options, as amended above) or (b)
three months following the termination of your relationship as a director with
the Company for any reason other than death or disability; provided, however, that in no
event shall an Option be exercisable beyond its original expiration
date.  For the avoidance of doubt, with respect to the Options
numbered 1597, 1841, and 2011 on Exhibit A, you will continue to be entitled to
receive Dividend Equivalent Rights pursuant to those outstanding Options until
the earlier of the date the related Option has been exercised or is
terminated.

    
      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        Mr.
George E. Bull, III

        March 17,
2010

        Page 3 of
4

         

      

    

    Except as
amended hereby, your Options and Deferred Stock Awards shall remain subject to
their terms and conditions, including, without limitation, those regarding
vesting, exercisability and termination as currently set forth in the applicable
Award agreements.  This letter agreement sets forth our entire
understanding and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of the Company in respect of
the subject matter contained herein.

    


    Please
indicate your acceptance of the terms and provisions of this Agreement by
signing both copies of this letter agreement and returning one copy to
me.  Please keep a copy for your files.  By signing below,
you acknowledge and agree that you have carefully read this Agreement in its
entirety; fully understand and agree to its terms and provisions; and intend and
agree that it be final and legally binding on you and the
Company.  This letter agreement shall be governed and construed under
the internal laws, but not any law of conflicts that would require the
application of the laws of ay other jurisdiction, of the State of Maryland and
may be executed in several counterparts.

     

    [Signature Pages
Follow]

    


    
      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        Mr.
George E. Bull, III

        March 17,
2010

        Page 4 of
4

      

       



    


    


    Very
truly yours,

    


    


    REDWOOD
TRUST, INC.

    


    


    By:  /s/ Martin S.
Hughes  

           Name:
Martin S. Hughes

           Title:
President, Co-Chief Operating Officer

                     and
Chief Financial Officer

     

    


     

    Agreed
and Accepted:

    


    
       



    /s/
George E. Bull,
III                   

    George E.
Bull, III

    


    


    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    


    Exhibit
A

    


    


    Deferred
Stock Awards

    


    
      	
              Grant
      Date

            	
              DSUs
      Granted

            
	
              12/8/2005

            	
              81,399.00

            
	
              11/29/2006

            	
              44,500.00

            
	
              1/16/2008

            	
              46,977.76

            
	
              5/23/2008

            	
              31,080.23

            
	
              12/10/2008

            	
              190,100.00

            
	
              12/9/2009

            	
              171,467.761

            
	
              2/25/2010

            	
              131,930.69

            


    

    


    


    Options

    


    
      	
              Grant
      Date

            	
              Option
      Number

            	
              Option
      Price

            	
              Shares
      Exercisable

            	
              Expiration
      Date

            
	
              12/14/2000

            	
              1597

            	
              $17.6250

            	
              21,450

            	
              12/14/2010

            
	
              12/10/2003

            	
              1841

            	
              $52.4600

            	
              60,000

            	
              12/10/2013

            
	
              12/1/2004

            	
              2011

            	
              $58.2300

            	
              31,496

            	
              12/1/2014

            
	
              3/8/2006

            	
              2338

            	
              $41.0900

            	
              33,871

            	
              12/17/2011

            
	
              11/29/2006

            	
              2347

            	
              $56.1800

            	
              39,769

            	
              12/19/2002

            


    

    


    

      

    

    
      	
              1

            	
              2009
      Award: 71,445 Award Shares subject to this award will vest effective June
      1, 2010, and the remaining unvested Award Shares will be forfeited
      effective June 1,
2010.