Exhibit 10.25

         

        FIRST
AMENDMENT TO

        AMENDED
AND RESTATED EMPLOYMENT AGREEMENT

         

        THIS FIRST AMENDMENT TO EMPLOYMENT
AGREEMENT (this “Agreement”), is entered into as of the 24th day of
February 2011 by and between HAROLD F.
ZAGUNIS (the “Executive”) and REDWOOD TRUST, INC., a
Maryland Corporation (the “Company”).

         

        WHEREAS, the Executive and the
Company have entered into an Amended and Restated Employment Agreement dated as
of March 31, 2009; and

         

        WHEREAS, the Executive and the
Company desire to enter into this Agreement for purposes of amending the
Employment Agreement as set forth herein;

         

        NOW, THEREFORE, for good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Executive and the Company hereby agree that the Employment
Agreement is hereby amended as follows effective upon February 25, 2011:
 

         

        1.           Section
3(b) of the Employment Agreement shall be amended to replace the target annual
bonus percentage of “75%” specified therein with “100%”.

         

        2.           Section
7(a)(ii) of the Employment Agreement shall be amended as follows:

         

        (A)
within clause (x) of Section 7(a)(ii) the reference to “1.75 times” shall be
amended to read “2.0 times”; and

         

        (B)
within clause (y) of Section 7(a)(ii) the reference to “0.75 times” shall be
amended to read “1.0 times”.

         

        3.           Section
7(a)(v) of the Employment Agreement shall be amended to read in its entirety as
follows:

         

        (v)           Payment/Benefit
Limitation.  If
any payment or benefit due under this Agreement, together with all other
payments and benefits that the Executive receives or is entitled to receive from
the Company or any of its subsidiaries, affiliates or related entities, would
(if paid or provided) constitute an “excess parachute payment” for purposes of
Section 280G of the Code, the amounts otherwise payable and benefits otherwise
due under this Agreement will either (i) be delivered in full, or (ii) be
limited to the minimum extent necessary to ensure that no portion thereof will
fail to be tax-deductible to the Company by reason of Section 280G of the Code
(and therefore, no portion thereof will be subject to the excise tax imposed
under Section 4999 of the Code), whichever of the foregoing amounts, taking into
account applicable federal, state and local income and employment taxes and the
excise tax imposed under Section 4999 of the Code, results in the receipt by the
Executive, on an after-tax basis, of the greatest amount of payments and
benefits, notwithstanding that all or some portion of such payments and/or
benefits may be subject to the excise tax imposed under Section 4999 of the
Code.  Unless otherwise specified in writing by the Executive, in the
event that the payments and/or benefits are to be reduced pursuant to this
Section 7(a)(v), such payments and benefits shall be reduced such that the
reduction of cash compensation to be provided to the Executive as a result of
this Section 7 is minimized.  In applying this principle, the
reduction shall be made in a manner consistent with the requirements of Section
409A of the Code and where two economically equivalent amounts are subject to
reduction but payable at different times, such amounts shall be reduced on a pro
rata basis but not below zero.  All determinations required to be made
under this Section 7(a)(v) shall be made by the Company's independent public
accounting firm (or such other nationally recognized public accounting firm as
may be selected by the Company and to which selection the Executive consents
(such consent not to be unreasonably withheld)) which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Executive that there has
been a payment or benefit subject to this Section 7(a)(v), or such earlier time
as is requested by the Company.


        
          
             


          

          
             


            
              

            

          

          
             


          

        


        2.           Except
as hereby specifically amended or modified, the terms of the Employment
Agreement, as amended by this Agreement, shall remain in full force and
effect.  This Agreement may be executed by the parties hereto in two
counterparts, each of which shall be an original and all of which together shall
constitute one and the same agreement.  This Agreement shall be
governed in all respects by the laws of the State of California (without regard
to conflict of law principles).

         

        [Signature Page
Follows]


        
          
             


          

          
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        IN WITNESS WHEREOF, the
Company has caused this Agreement to be executed by its duly authorized officer,
and the Executive has executed this Agreement, as of the date first above
written.

      

       

    

    
      
        	
                REDWOOD
      TRUST, INC.

              
	 
      
	
                By:

              	
                /s/ Andrew P. Stone

              
	 
      	
                Name:
      Andrew P. Stone

              
	 
      	
                Title:
      General Counsel & Secretary

              
	 
      	 
      
	
                      
                        
                    HAROLD
      F. ZAGUNIS

                  

                

              
	 
      	 
      
	 
      	
                      
                        
                    /s/ Harold F.
      Zagunis

                  

                

              


      

    


    
      
         


      

      
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