Document:

Exhibit 10.2

 

REDWOOD TRUST, INC.

PERFORMANCE STOCK UNIT AWARD AGREEMENT

 

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

 

Pursuant to the Redwood
Trust, Inc. Amended and Restated 2014 Incentive Award Plan (as may be amended from time to time, the “Plan”),
the Compensation Committee (the “Committee”) of the Board of Directors of the Company has determined that the
Participant is to be granted an award of Performance Stock Units for shares of the Company’s common stock, par value $0.01
per share (“Common Stock”), on the terms and conditions set forth herein and on Exhibit A hereto (the
 “Award”), and the Company hereby grants such Award.  This Award is being made in connection with a
deferral of compensation by the Participant pursuant to the Redwood Trust, Inc. Executive Deferred Compensation Plan, as amended
to date (the “Deferred Compensation Plan”), and the executed Deferral Election attached hereto as Exhibit
B (the “Deferral Election”). Any capitalized terms not defined herein shall have the meaning set forth in
the Plan or the Deferred Compensation Plan, as applicable.

 

1. Number
of Performance Stock Units Awarded.   This Award Agreement sets forth the terms and conditions of a Performance
Stock Unit Award with a target award of [______] shares of Common Stock, as the same may be adjusted to reflect cash dividends
declared on the Common Stock pursuant to Section 2 (the “Target Shares”). The number of units representing
shares of Common Stock that vest and shall be credited to the Participant’s Deferral Account pursuant to this Award (the
 “Award Shares”) shall be determined based upon the Company’s achievement of the Performance Goals set
forth in Exhibit A hereto (the “Performance Goals”) and may range from zero percent (0%) to two hundred
fifty percent (250%) of the Target Shares.

 

2. Effect of Dividends on Target Shares.   On the last day of the Performance Period (as defined in Exhibit
A) (or, in the event the Performance Period ends due to a Change in Control, on the applicable vesting date), the number of
Target Shares set forth in Section 1 shall automatically be increased to reflect all cash dividends, if any, which have been declared
to all or substantially all holders of the outstanding shares of Common Stock with a record date during the period beginning on
the date of this Award Agreement and ending on the applicable vesting date (such period, the “Award Period”).  On
such date, the Target Shares shall be automatically increased by an aggregate number of shares determined by multiplying (x) the
number of Target Shares set forth in Section 1 by (y) the Dividend Reinvestment Factor (as defined below) with respect to the Award
Period.

 

             “Dividend
Reinvestment Factor” shall mean, with respect to the Company and a designated period of time, the number of shares of
Common Stock that would have been acquired from the reinvestment of cash dividends, if any, which have been declared to all or
substantially all holders of the outstanding shares of Common Stock with a record date during such designated period of time, with
respect to one share of Common Stock outstanding on the first day of such designated period of time.   Such number
of shares shall be determined cumulatively, for each cash dividend declared with a record date during such designated period of
time (beginning with the first such cash dividend with a record date during such designated period of time and continuing chronologically
with each such subsequent cash dividend declared with a record date during such designated period of time (and in each case other
than the first such cash dividend, taking into account any increase in shares resulting from the application of this formula to
the chronologically immediately preceding cash dividend)), by multiplying (i) the applicable number of shares of Common Stock immediately
prior to the record date of such cash dividend (which in the case of the first such cash dividend declared with a record date during
such designated period of time shall be one) by (ii) the per share amount of such cash dividend and dividing the product by the
Fair Market Value per share of Common Stock on the ex-dividend date with respect to such dividend. With respect to a Comparator
Group Company, Dividend Reinvestment Factor shall be determined in a manner consistent with the foregoing, but in respect of such
Comparator Group Company’s common stock.

 

Any amounts that may
become payable in respect of this Section 2 shall be treated separately from the Award Shares and the rights arising in connection
therewith for purposes of Section 409A of the Code.

 

Any calculations made
pursuant to this Section 2 shall contemplate any necessary adjustments to the number of Target Shares in accordance with Section
14.2 of the Plan in the event of a Change in Control.

 

     

     

    

 

3. Vesting
and Payment of Award.   Except as otherwise may be provided in Exhibit A under subclause (i) of “Vesting
(Change in Control)”, the Award Shares shall vest and be credited as of [January 1, 2022], if at all, provided that
the Committee determines, in its sole discretion, whether and to what extent the Performance Goals set forth in Exhibit A
have been attained.  The crediting of the Award Shares is contingent on the attainment of the Performance Goals as set
forth on Exhibit A.  In connection with such determination by the Committee and subject to the provisions of the
Plan and this Award Agreement (including Exhibit A), the Participant shall be entitled to crediting of that portion of the
Performance Stock Units as corresponds to the Performance Goals attained (as determined by the Committee in its sole discretion)
as set forth on Exhibit A.

  

No Award Shares shall
be credited to the Participant’s Deferral Account unless the Committee determines, in its sole discretion, whether and to
what extent the Performance Goals set forth in Exhibit A have been attained and the number of Award Shares earned pursuant
to the Award have been determined and have vested in accordance with the provisions of Exhibit A.  Any shares
of Common Stock in respect of Award Shares shall be delivered to the Participant at the time or times provided in the Deferral
Election and the Deferred Compensation Plan (or any re-deferral election made in accordance with Section 409A of the Code and the
terms of the Deferred Compensation Plan).  

 

4. Forfeiture
of Performance Stock Units.   

 

(a) Upon:

 

(i) the
Participant’s Retirement (as defined below) prior to [January 1, 2020] (or, if earlier, the expiration of the Performance
Period), the Target Shares shall be reduced on a pro-rata basis to reflect (x) the number of days of employment completed during
the period beginning on the date of this Agreement divided by (y) 365 (or, if less, the number of days in the Performance Period),
and the Award shall continue to be eligible to vest and become payable based on such prorated number of Target Shares and the Performance
Goals in accordance with the provisions of Exhibit A; or

 

(ii) the Participant’s
Termination of Service as an Employee by the Company without Cause (as defined below) prior to the expiration of the Performance
Period, the Target Shares shall be reduced on a pro-rata basis to reflect (x) the number of days of employment completed during
the period beginning on first day of the Performance Period divided by (y) 1,095 (or, if less, the number of days in the Performance
Period), and the Award shall continue to be eligible to vest and become payable based on such prorated number of Target Shares
and the Performance Goals in accordance with the provisions of Exhibit A.

 

(b) Upon
the Participant’s Termination of Service as an Employee due to Retirement on or after [January 1, 2020], death or
Disability (or, if the Participant is party to an employment agreement with the Company, in accordance with such employment agreement
in the case of a Termination of Service for “Good Reason”, as defined in such employment agreement) prior to
the expiration of the Performance Period, the Target Shares shall not be reduced, and the Award shall continue to be eligible to
vest and become payable based on the number of Target Shares and the Performance Goals in accordance with the provisions of Exhibit
A.  

 

(c) Upon
the Participant’s Termination of Service as an Employee for any reason other than death, Disability, Retirement, or without
Cause (or, if the Participant is party to an employment agreement with the Company, for Good Reason), prior to expiration of the
Performance Period, all Award Shares shall become ineligible for crediting to the Participant’s Deferral Account and shall
be forfeited.  

 

(d) Any
Award Shares which have vested and been credited to the Participant’s Deferral Account prior to (or in connection with) the
Participant’s Termination of Service as an Employee shall not be forfeited in the event of such Termination of Service as
an Employee but rather delivery of such shares shall continue to be governed by the terms of the Deferral Election and the Deferred
Compensation Plan (or any re-deferral election made in accordance with Section 409A of the Code and the terms of the Deferred Compensation
Plan).

 

     

     

    

 

For purposes of this Award Agreement, “Cause”
shall have such meaning defined in the Participant’s employment agreement with the Company or, if no such agreement exists
or does exist but does not contain such a definition, shall mean (i) the Participant’s material failure to substantially
perform the reasonable and lawful duties of the Participant’s position for the Company, which failure shall continue for
thirty (30) days after written notice thereof by the Company to the Participant; (ii) acts or omissions constituting gross negligence,
recklessness or willful misconduct on the Participant’s part in respect of the performance of the Participant’s duties,
the Participant’s fiduciary obligations or otherwise relating to the business of the Company; (iii) the habitual or repeated
neglect of the Participant’s duties; (iv) the Participant’s conviction of a felony; (v) the Participant’s theft
or embezzlement, or attempted theft or embezzlement, of money or tangible or intangible assets or property of the Company or its
employees, customers, clients, or others having business relations with the Company; (vi) any act of moral turpitude by the Participant
injurious to the interest, property, operations, business or reputation of the Company; or (vii) the Participant’s unauthorized
use or disclosure of trade secrets or confidential or proprietary information pertaining to the Company’s business.

 

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

 

5. Adjustments.  
This Award and the Performance Goals shall be subject to adjustment as set forth in this Award Agreement and the Plan.

 

6. At-Will
Employment.   This Award Agreement is not an employment contract and nothing in this Award Agreement shall be
deemed to create in any way whatsoever any obligation of the Participant to continue as an Employee, Consultant or Director of
the Company or on the part of the Company to continue the employment or other service relationship of the Participant with the
Company.  It is understood and agreed to by the Participant that the Award and participation in the Plan or the Deferred
Compensation Plan does not alter the at-will nature of the Participant’s relationship with the Company (subject to the terms
of any separate employment agreement the Participant may have with the Company).  The at-will nature of the Participant’s
relationship with the Company can only be altered by a writing signed by both the Participant and the Chief Executive Officer or
the President of the Company. 

 

 

7. Notices.
   Any notice required or permitted under this Award Agreement shall be deemed given when delivered personally, or when
deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Participant either at the Participant’s
address set forth below or such other address as the Participant may designate in writing to the Company, and to the Company:  Attention:  General
Counsel, at the Company’s address or such other address as the Company may designate in writing to the Participant.

 

 

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

 

     

     

    

 

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

 

10. Existing
Agreements.   This Award Agreement does not supersede nor does it modify any existing agreements between the
Participant and the Company. Notwithstanding the foregoing, if the Participant is a party to an employment agreement with
the Company that includes provisions relating to the treatment of equity awards upon termination of the Participant’s employment
with the Company, then (i) the terms of this Award Agreement shall supersede the terms of such employment agreement solely with
respect to the treatment of the Performance Stock Unit award granted hereby upon termination of the Participant’s employment
with the Company due to Retirement as defined herein; and (ii) except as set forth on Exhibit A under “Vesting (Change
in Control)”, the terms of such employment agreement shall supersede the terms of this Award Agreement solely with respect
to the treatment of the Performance Stock Unit award granted hereby upon termination of the Participant’s employment with
the Company for any other reason.

  

11. Incorporation
of Plan.   The Plan and the Deferred Compensation Plan are incorporated by reference and made a part of this
Award Agreement, and this Award Agreement is subject to all terms and conditions of the Plan and the Deferred Compensation Plan
as in effect from time to time.  

 

 

12. Amendments.
    This Award Agreement may be amended or modified at any time by an instrument in writing signed by the parties
hereto.  Notwithstanding the foregoing, the Deferral Election shall be irrevocable and the dates specified for distribution
of vested Award Shares may not be modified after the date hereof except as otherwise permitted under Section 409A of the Code.

 

 

13.Withholding.The
Company shall withhold, or cause to be withheld, Award Shares or other compensation otherwise vesting or issuable under this Award
in satisfaction of any applicable withholding tax obligations. The number of Award Shares which may be so withheld or surrendered
shall be limited to the number of Award Shares which have a fair market value on the date of withholding no greater than the aggregate
amount of such liabilities based on the maximum individual statutory withholding rates in the Participant’s applicable jurisdictions
for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income. To the extent
that any Federal Insurance Contributions Act tax withholding obligations arise in connection with the Award prior to the applicable
vesting date, the Administrator shall accelerate the payment of a portion of the Award sufficient to satisfy (but not in excess
of) such tax withholding obligations and any tax withholding obligations associated with any such accelerated payment, and the
Administrator may withhold such amounts in satisfaction of such withholding obligations.

  

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

 

     

     

    

 

IN WITNESS WHEREOF,
the parties have executed this Award Agreement on the day and year first above written.

 

	 	REDWOOD TRUST, INC.
	 	 	 
	 	By:	 
	 	 	[Andrew P. Stone
	 	 	General Counsel & Corporate Secretary]
	 	 	One Belvedere Place, Suite 300
	 	 	Mill Valley, CA  94941
	 	 	 
	 	The undersigned hereby accepts and agrees to all the terms and provisions of this Award Agreement and to all the terms and provisions of the Plan herein incorporated by reference.
	 	 
	 	 
	 	[First Name] [Last Name]
	 	c/o Redwood Trust, Inc.
	 	One Belvedere Place, Suite 300
	 	Mill Valley, CA  94941

 

     

     

    

 

Exhibit A

Performance
Goals

 

Performance Period: The performance
period begins on [January 1, 2019] and ends on the earlier of (i) [December 31, 2021] or (ii) the date of consummation
of a Change in Control (the “Performance Period”).

 

Performance Goals: The number
of Award Shares which will be eligible for vesting and crediting to the Participant’s Deferral Account (the “Eligible
Award Shares”), if any, shall be determined based upon the Company’s achievement during the Performance Period
of cumulative book value total shareholder return, relative total shareholder return and absolute total shareholder return goals,
each as further described and defined below.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

     

     

    

 

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

 

Notwithstanding the foregoing, in the event
that a Change in Control occurs and the Participant either (i) remains in continuous employment until immediately prior to such
Change in Control or (ii) experienced a Termination of Service as an Employee prior to such Change in Control and the Award Shares
are not subject to forfeiture in connection with such termination under Section 4(c) of this Award Agreement (including without
limitation in connection with a Termination of Service by the Participant for Good Reason in accordance with the Participant’s
employment agreement), then the Performance Period will end upon such Change in Control, and the number of Eligible Award Shares
will be determined by reference to (i) bvTSR being deemed equal to 100% of the bvTSR Goal and (ii) the Company’s actual Relative
TSR and actual TSR achieved during the shortened Performance Period.

 

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

 

Vesting (Change in Control):
If the Performance Period ends due to the occurrence of a Change in Control and:

 

		(i)	the Participant remains in continuous employment until the date of such Change in Control, then
any Eligible Award Shares that become eligible for vesting due to the Change in Control shall remain outstanding and eligible to
vest on [January 1, 2022], 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, 2022],
then any Eligible Award Shares shall vest and be credited to the Participant’s Deferral Account as of such termination; or

 

		(ii)	the Participant experienced a Termination of Service as an Employee, prior to the date of the Change
in Control, due to death, Disability, Retirement, without Cause (or, if the Participant is party to an employment agreement with
the Company, for Good Reason), in any case, then any Eligible Award Shares that become eligible for vesting due to the Change in
Control shall vest immediately prior to such Change in Control and shall be credited to the Participant’s Deferral Account
on the date of such Change in Control.

 

Notwithstanding the foregoing, in the event
that a successor corporation in a Change in Control refuses to assume or substitute for the Award, then any Eligible Award Shares
that become eligible for vesting due to the Change in Control shall vest immediately prior to such Change in Control and shall
be credited to the Participant’s Deferral Account on the date of such Change in Control.

 

Definitions:

 

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

 

(i) the sum of:

 

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

 

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

 

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

 

by,

 

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

 

“bvTSR Goal” means 25%.

 

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

 

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

 

     

     

    

 

“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) 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) 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; and

 

(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.

 

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

 

     

     

    

 

“Per Share Price” means,
with respect to the Company and any Comparator Group Company, the average of the closing prices of the applicable company’s
common stock during the sixty (60) consecutive trading days ending on the day prior to the Valuation Date, adjusted to reflect
the reinvestment of any cash dividends declared to all or substantially all holders of the outstanding shares of such company’s
common stock with a record date during the calculation period; provided, however, that for purposes of calculating the Company’s
Per Share Price in the event of a Change in Control, the Per Share Price shall be the price per share of Common Stock paid in connection
with such Change in Control or, to the extent that the consideration in the Change in Control transaction is paid in stock of the
acquiror or its affiliate, then, unless otherwise determined by the Administrator (including in connection with valuing any shares
that are not publicly traded), Per Share Price shall mean the value of the consideration paid per share of Common Stock based on
the average of the closing trading prices of a share of such acquiror stock on the principal exchange on which such shares are
then traded for each trading day during the five consecutive trading days ending on and including the date on which a Change in
Control occurs.

 

“Qualifying Termination” means the Participant’s
Termination of Service as an Employee (i) due to the Participant’s death, Disability or Retirement or (ii) upon or within
24 months following a Change in Control, either by the Company without Cause or by the Participant for Good Reason.

 

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

 

“TSR” means, for
the Performance Period, the Company’s or a Comparator Group Company’s cumulative total shareholder return (rounded
to the nearest hundredth), expressed as a percentage, determined as the quotient obtained by dividing:

 

(A) the sum of:

 

(x) the Per Share Price
as of the Valuation Date, plus

 

(y) the Per Share Price
as of the Valuation Date multiplied by the Dividend Reinvestment Factor with respect to the Performance Period,

 

by,

 

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

 

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

 

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

 

“Valuation Date” means
[December 31, 2021]; provided, however, that in the event of a Change in Control that occurs prior to [December
31, 2021], the Valuation Date shall mean the date of the Change in Control.

 

 

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

 

     

     

    

 

Schedule
I

 

Comparator
Group Companies

 

 

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

 

     

     

    

 

Exhibit
B

 

Deferral
Election 

 

[to
be separately attached]

 

     

     

    

 

Exhibit
C - Restrictive Covenants

 

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

 

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

 

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

 

		4.	Exceptions. Nothing herein shall prohibit or restrict the Participant from: (i) making any
disclosure of information required by law; (ii) providing information to, or testifying or otherwise assisting in any investigation
or proceeding brought by, any federal or state regulatory or law enforcement agency or legislative body, any self-regulatory organization,
or the Company’s Human Resources, Legal, or Compliance Departments; (iii) testifying, participating in or otherwise assisting
in a proceeding relating to an alleged violation of the Sarbanes-Oxley Act of 2002, any federal, state or municipal law relating
to fraud or any rule or regulation of any self-regulatory organization; or (iv) filing a charge with, reporting possible violations
to, or participating or cooperating with the Securities and Exchange Commission or any other federal, state or local regulatory
body or law enforcement agency (each a “Governmental Agency”). Nothing herein shall be construed to limit the
Participant’s right to receive an award for any information provided to a Governmental Agency in relation to any whistleblower,
anti-discrimination, or anti-retaliation provisions of federal, state or local law or regulation. In addition, notwithstanding
the foregoing obligations, pursuant to 18 U.S.C. § 1833(b), the Participant understands and acknowledges that the Participant
shall not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret
that is made: (1) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney,
and solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other document
filed in a lawsuit or other proceeding, if such filing is made under seal and protected from public disclosure. Nothing in this
Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly
allowed by 18 U.S.C. § 1833(b).Exhibit 10.3

 

[REDWOOD TRUST, INC. LETTERHEAD]

 

[Date]

 

 

 

[First Name] [Last Name]

[Address]

[City, State, Zip Code]

 

Re:       Amendment
to Equity Awards Under the Company’s 2014 Incentive Award Plan

 

Dear [First Name]:

 

The Compensation Committee
of the Board of Directors of Redwood Trust, Inc. (the “Company”) has decided to amend the terms of all
equity awards currently outstanding under the Company’s Amended and Restated 2014 Incentive Award Plan (the “Plan”),
including Restricted Stock, Deferred Stock Units and Performance Stock Units (each, as defined in the Plan). You are receiving
this letter because the Company previously granted you one or more equity awards under the Plan that are currently outstanding
as of the date hereof (each, an “Existing Award”). Capitalized terms used but not otherwise defined herein
shall have such meaning as is contained in the applicable Existing Award Agreement or the Plan, as applicable.

 

This letter serves
as an amendment (the “Amendment”) to each of your Existing Awards. For good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, you and the Company agree to the terms of the Amendment, which are as
follows:

 

1.       Addition
of Change in Control Provision. Notwithstanding anything to the contrary in the award agreement evidencing an Existing Award
(each, an “Existing Award Agreement”), each Existing Award is hereby
amended such that, if you experience a Qualifying Termination on or within twenty-four (24) months following a Change in Control
(as defined in the Plan), your Existing Award will become vested in full (and any forfeiture restrictions thereon, including any
Purchase Option, shall lapse) as of immediately prior to such Qualifying Termination, as defined below.  

 

A
“Qualifying Termination” means a Termination of Service by the Company
without Cause or by you for Good Reason, as such terms are defined in your Existing Award Agreement or, if not defined in your
Existing Award Agreement:

 

“Cause”
shall have such meaning defined in your employment agreement with the Company or, if no such agreement exists or does exist but
does not contain such a definition, shall mean (i) your material failure to substantially perform the reasonable and lawful duties
of your position for the Company, which failure shall continue for thirty (30) days after written notice thereof by the Company
to you; (ii) acts or omissions constituting gross negligence, recklessness or willful misconduct on your part in respect of the
performance of your duties, your fiduciary obligations or otherwise relating to the business of the Company; (iii) the habitual
or repeated neglect of your duties; (iv) your conviction of a felony; (v) your theft or embezzlement, or attempted theft or embezzlement,
of money or tangible or intangible assets or property of the Company or its employees, customers, clients, or others having business
relations with the Company; (vi) any act of moral turpitude by you injurious to the interest, property, operations, business or
reputation of the Company; or (vii) your unauthorized use or disclosure of trade secrets or confidential or proprietary information
pertaining to the Company’s business.

 

     

     

    

  

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

 

[Note
that, following such accelerated vesting, any Award Shares subject to an Existing Award that is a Deferred Stock Unit award will
be Vested Award Shares. In addition, with respect to an Existing Award that is a Performance Stock Unit award, this accelerated
vesting benefit will apply to any Award Shares that become eligible for vesting following a Change in Control in accordance with
the applicable Existing Award Agreement.] 

  

2.       No
Further Amendments. Except as specifically set forth above, all of the remaining terms of your Existing Award shall remain
unchanged and in full force and effect.

 

3.       Miscellaneous.
This Amendment may be delivered electronically and may be executed in counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same document. This Amendment shall be governed by and construed and enforced
in accordance with Delaware law without regard to the conflict of laws provisions thereof.

 

Your consent is required
for this Amendment to become effective. Please confirm your agreement to the foregoing by signing this letter in the space provided
below for your signature and returning it to ____________ at One Belvedere Place, Suite 300, Mill Valley, CA 94941 or via email
to _____________@redwoodtrust.com. Please retain one fully executed original for your files. Should you have any questions regarding
this letter, please feel free to call ___________________ at (415) ___-____.

 

 

 

     

     

    

 

 

IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed as of the date first written above.

 

	
        REDWOOD TRUST, INC.

         

	 	 
	By:	 
	 	[Andrew P. Stone]
	 	[General Counsel & Corporate Secretary]
	 	One Belvedere Place, Suite 300
	 	Mill Valley, CA  94941
	 	 
	The undersigned hereby accepts and agrees to all the terms and provisions of this Amendment.
	
         

        EQUITY AWARD HOLDER

         

         

	 
	[First Name] [Last Name]

 

 

 

 

 

    
[Signature Page to Equity Award Amendment]

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