Document:

SETTLEMENT
AGREEMENT

 

This
Settlement Agreement (this “Agreement”) is entered into as of December 8, 2017 (the “Effective
Date”) by and among UAHC Ventures LLC, a Nevada limited liability company (“Lender”),
MGT Capital Investments, Inc., a Delaware corporation (“Company”), and MGT Mining Two, Inc., a Delaware
corporation (“Mining Sub”, and together with Company, “Borrower”). Capitalized
terms used in this Agreement without definition shall have the meanings given to them in the Note (defined below). Each of Borrower
and Lender is sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

A.
Borrower previously sold and issued to Lender that certain Secured Convertible Promissory Note dated August 18, 2017 in the original
principal amount of $2,410,000.00 (the “Note”) and that certain Warrant to Purchase Shares of Common
Stock (the “Warrant”) pursuant to that certain Securities Purchase Agreement dated August 18, 2017 by
and between Lender and Borrower (the “Purchase Agreement,” and together with the Note, the Warrant,
and all other documents entered into in conjunction therewith, the “Transaction Documents”).

 

B.
Certain disputes have arisen between the Parties regarding the Lender Conversion Price applicable to Lender Conversions under
the Note and the Exercise Price (as defined in the Warrant) to be used for exercises of the Warrant (the “Disputes”).

 

C.
Lender and Borrower have agreed, subject to the terms, amendments, conditions and understandings expressed in this Agreement,
to settle the Disputes as set forth herein.

 

NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:

 

1.
Recitals. Each of the Parties hereto acknowledges and agrees that the recitals set forth above in this Agreement are true
and accurate, are contractual in nature, and are hereby incorporated into and made a part of this Agreement.

 

2.
Lender Conversion Price; Exercise Price. Borrower and Lender agree that, notwithstanding the terms of the Note and the
Warrant, the Lender Conversion Price and the Exercise Price shall each be equal to $0.75 per share of Common Stock as of the Effective
Date.

 

3.
Delivery of Conversion Shares. By its execution below, Company acknowledges its receipt of the Conversion Notice attached
hereto as Exhibit A, pursuant to which Company agrees to deliver to Lender 3,381,816 Conversion Shares (the “Conversion
Shares”), notwithstanding any contrary terms in the Note. Company agrees to deliver the Conversion Shares to Lender
in the manner prescribed in the Note for delivery of Conversion Shares; provided, however, that to the extent Company’s
delivery of the Conversion Shares would cause Lender’s ownership of Company’s Common Stock to exceed the Ownership
Limitation (as defined below), Company agrees to reserve the applicable Ownership Limitation Shares for the exclusive benefit
of Lender and to issue such Ownership Limitation Shares to Lender upon Lender’s delivery of notices to Company of the number
of Ownership Limitation Shares that may be delivered to Lender without causing Lender to exceed the Maximum Percentage. Upon Lender’s
receipt of all of the Conversion Shares, Borrower shall be deemed to have paid the entire Outstanding Balance of the Note in full.

 

    	 

     

    

 

4.
Warrant Shares; Cap. Borrower and Lender agree that, notwithstanding the terms of the Warrant, the number of Exercise Shares
(as defined in the Warrant) exercisable under the Warrant is hereby increased to 1,206,667. Moreover, Borrower and Lender further
agree that the number of Delivery Shares (as defined in the Warrant) deliverable under the Warrant shall not exceed 3,620,001.

 

5.
Ownership Limitations. Borrower and Lender agree that, notwithstanding the Maximum Percentages set forth in the Note and
the Warrant, as of the Effective Date the Maximum Percentages for each of the Note and the Warrant shall be equal to 4.99%. Moreover,
and notwithstanding Company’s obligation to deliver the Conversion Shares to Lender pursuant to Section 3 above or its obligations
to deliver Delivery Shares to Lender pursuant to the terms of the Warrant (such Conversion Shares and Delivery Shares, together,
the “Shares”), each of Company and Lender acknowledge and agree that such deliveries are subject to
the ownership limitation provisions set forth in Section 12 of the Note and Section 2.2 of the Warrant, respectively (the “Ownership
Limitation”), and in the event the number of Shares Company is required to deliver to Lender exceeds the applicable
Maximum Percentage (as amended above), Company agrees to reserve the Ownership Limitations Shares for the exclusive benefit of
Lender and deliver such Ownership Limitation Shares to Lender in accordance with the terms of Section 12 of the Note and Section
2.2 of the Warrant, as applicable. In furtherance thereof, Company agrees to cause its transfer agent to establish a separate
reserve of shares of Common Stock equal to the number of Ownership Limitation Shares Company is required to reserve pursuant to
Section 12 of the Note and Section 2.2 of the Warrant, respectively, upon Lender’s delivery of written request to Company
and its transfer agent. Company agrees that it may not deny any exercise of the Warrant or Conversion of the Note on the grounds
that such exercise would cause the number of shares of Common Stock owned by Lender to exceed the Maximum Percentage; rather,
in such event Company shall comply with the terms of Section 12 of the Note and Section 2.2 of the Warrant, as applicable, and
continue delivering Shares to Lender pursuant to such provisions.

 

6.
Restrictions on Sales of Shares.

 

(a)
Volume Limitation. Lender agrees that, with respect to the sale of any Shares by it and Iliad Research and Trading, L.P.,
a Utah limited partnership and affiliate of Lender (“Iliad,” and together with Lender, “Investor”),
Investor’s Net Sales (as defined below) of such Shares shall not exceed (i) twelve percent (12%) of Company’s daily
dollar trading volume on any given Trading Day (which, for purposes hereof, means the number of shares traded during such Trading
Day multiplied by the volume weighted average price per share for such Trading Day), and (ii) ten percent (10%) of Company’s
weekly dollar trading volume in any given week (which, for purposes hereof, means the number of shares traded during such calendar
week multiplied by the volume weighted average price per share for such week) (the “Volume Limitation”).
For the avoidance of doubt, the Volume Limitation shall apply to Lender and Iliad in the aggregate, as determined by Lender and
Iliad, and there shall be no separate cap or limitation applicable to either Lender or Iliad. For purposes of this Agreement,
the term “Net Sales” means the gross proceeds from sales of the Shares sold in a calendar week minus any trading
commissions or costs associated with clearing and selling such Shares minus the purchase price paid for any shares of Common Stock
purchased on the open market during such week. For the avoidance of doubt, any amounts received by Investor in connection with
previous sales of shares either entity acquired in any way shall not be deemed to be Net Sales.

 

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(b)
Breach of Volume Limitation. Borrower and Lender agree that in the event Investor breaches the Volume Limitation where
its Net Sales of Shares during any given period exceed the dollar volume it is permitted to sell during such period pursuant to
the Volume Limitation (such excess, the “Excess Sales”), then in such event, as Borrower’s sole and exclusive
remedy for such breach (and which breach may not be used as a defense to Borrower’s performance of its obligations hereunder),
Investor shall be obligated to pay to Borrower in cash a fee in the amount of 25% of the Excess Sales (the “Excess Sales
Fee”) upon Borrower’s delivery to Investor of a written notice setting for its basis for charging such Excess
Sales Fee. For illustration purposes only, if Company’s weekly dollar trading volume was $400,000.00 for a calendar week,
Investor would be entitled to Net Sales of up to $40,000.00 during that week. If Investor’s Net Sales for such week were
equal to $50,000.00, and Investor had sold the maximum number of Shares it could within the Volume Limitation during each prior
week, then in such event Investor would be obligatd to pay to Borrower an Excess Sales Fee in the amount of $2,500.00 (($50,000.00
- $40,000.00) x 25%). For the avoidance of doubt, in such event Investor shall be entitled to retain the Excess Sales and shall
have no obligation to return the Excess Sales to Borrower.

 

7.
Failure to Comply. Borrower understands that the amendments to the Transaction Documents set forth herein, Lender’s
agreement to settle the Note for the Conversion Shares, and all other obligations, restrictions, and limitations of or on Lender
hereunder shall terminate immediately upon the occurrence of any breach of this Agreement (including, without limitation, Borrower’s
failure to deliver Conversion Shares as and when required hereunder). In any such case, Lender may seek all recourse available
to it under the terms of the Transaction Documents, this Agreement, or applicable law following any breach.

 

8.
Representations, Warranties and Agreements. In order to induce Lender to enter into this Agreement, Borrower, for itself,
and for its affiliates, successors and assigns, hereby acknowledges, represents, warrants and agrees as follows:

 

(a)
Borrower has full power and authority to enter into this Agreement and to incur and perform all obligations and covenants contained
herein, all of which have been duly authorized by all proper and necessary action. No consent or approval of Borrower, and no
consent, approval, filing or registration with or notice to any governmental authority is required as a condition to the validity
of this Agreement or the performance of any of the obligations of Borrower hereunder.

 

(b)
All understandings, representations, warranties and recitals contained or expressed in this Agreement are true, accurate, complete,
and correct in all respects; and no such understanding, representation, warranty, or recital fails or omits to state or otherwise
disclose any material fact or information necessary to prevent such understanding, representation, warranty, or recital from being
misleading. Borrower acknowledges and agrees that Lender has been induced in part to enter into this Agreement based upon Lender’s
justifiable reliance on the truth, accuracy, and completeness of all understandings, representations, warranties, and recitals
contained in this Agreement. There is no fact known to Borrower or which should be known to Borrower which Borrower has not disclosed
to Lender on or prior to the date hereof which would or could materially and adversely affect the understandings of Lender expressed
in this Agreement or any representation, warranty, or recital contained in this Agreement.

 

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(c)
Except as expressly set forth in this Agreement, Borrower acknowledges and agrees that neither the execution and delivery of this
Agreement nor any of the terms, provisions, covenants, or agreements contained in this Agreement shall in any manner release,
impair, lessen, modify, waive, or otherwise affect the liability and obligations of Borrower under the terms of the Judgment or
applicable law related thereto.

 

(d)
Borrower has no defenses, affirmative or otherwise, rights of setoff, rights of recoupment, claims, counterclaims, actions or
causes of action of any kind or nature whatsoever against Lender, directly or indirectly, arising out of, based upon, or in any
manner connected with, the transactions contemplated hereby, whether known or unknown, which occurred, existed, was taken, permitted,
or begun prior to the execution of this Agreement. To the extent any such defenses, affirmative or otherwise, rights of setoff,
rights of recoupment, claims, counterclaims, actions or causes of action exist or existed, such defenses, rights, claims, counterclaims,
actions and causes of action are hereby waived, discharged and released. Borrower hereby acknowledges and agrees that the execution
of this Agreement by Lender shall not constitute an acknowledgment of or admission by Lender of the existence of any claims or
of liability for any matter or precedent upon which any claim or liability may be asserted.

 

(e)
Borrower hereby acknowledges that it has freely and voluntarily entered into this Agreement after an adequate opportunity and
sufficient period of time to review, analyze, and discuss (i) all terms and conditions of this Agreement, (ii) any and all other
documents executed and delivered in connection with the transactions contemplated by this Agreement, and (iii) all factual and
legal matters relevant to this Agreement and/or any and all such other documents, with counsel freely and independently selected
by Borrower (or had the opportunity to be represented by counsel). Borrower further acknowledges and agrees that it has actively
and with full understanding participated in the negotiation of this Agreement and all other documents executed and delivered in
connection with this Agreement after consultation and review with its counsel (or had the opportunity to be represented by counsel),
that all of the terms and conditions of this Agreement and the other documents executed and delivered in connection with this
Agreement have been negotiated at arm’s-length, and that this Agreement and all such other documents have been negotiated,
prepared, and executed without fraud, duress, undue influence, or coercion of any kind or nature whatsoever having been exerted
by or imposed upon any Party by any other Party. No provision of this Agreement or such other documents shall be construed against
or interpreted to the disadvantage of any Party by any court or other governmental or judicial authority by reason of such Party
having or being deemed to have structured, dictated, or drafted such provision.

 

(f)
Borrower is solvent as of the date of this Agreement, and none of the terms or provisions of this Agreement shall have the effect
of rendering Borrower insolvent. The terms and provisions of this Agreement and all other instruments and agreements entered into
in connection herewith are being given for full and fair consideration and exchange of value.

 

    	4

     

    

 

(g)
There are no proceedings or investigations pending or threatened before any court or arbitrator or before or by, any governmental,
administrative, or judicial authority or agency, or arbitrator, against Borrower.

 

(h)
There is no statute, regulation, rule, order or judgment and no provision of any mortgage, indenture, contract or other agreement
binding on Borrower, which would prohibit or cause a default under or in any way prevent the execution, delivery, performance,
compliance or observance of any of the terms and conditions of this Agreement and/or any of the other documents executed and delivered
in connection with this Agreement.

 

(i)
Borrower has not received any cash or property consideration in any form whatsoever for entering into this Agreement.

 

10.
Arbitration. By its execution of this Agreement, each Party agrees to be bound by the Arbitration Provisions (as defined
in the Purchase Agreement) set forth as an exhibit to the Purchase Agreement and the Parties agree to submit all Claims (as defined
in the Arbitration Provisions) arising under this Agreement or any Transaction Document or other agreement between the Parties
and their affiliates to binding arbitration pursuant to the Arbitration Provisions.

 

11.
Governing Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah
without regard to the principles of conflict of laws. Each Party consents to and expressly agrees that the exclusive venue for
arbitration of any dispute arising out of or relating to this Agreement or any Transaction Document or the relationship of the
Parties or their affiliates shall be in Salt Lake County, Utah. Without modifying the Parties obligations to resolve disputes
hereunder or under any Transaction Document pursuant to the Arbitration Provisions, each Party hereto submits to the exclusive
jurisdiction of any state or federal court sitting in Salt Lake County, Utah in any proceeding arising out of or relating to this
Agreement and agrees that all Claims in respect of the proceeding may only be heard and determined in any such court and hereby
expressly submits to the exclusive personal jurisdiction and venue of such court for the purposes hereof and expressly waives
any claim of improper venue and any claim that such courts are an inconvenient forum. Each Party hereto hereby irrevocably consents
to the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by registered
or certified mail, postage prepaid, to its address as set forth in the Purchase Agreement, such service to become effective ten
(10) days after such mailing. BORROWER HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY
TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

 

12.
Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties
had signed the same document. All counterparts shall be construed together and constitute the same instrument. The exchange of
copies of this Agreement and of signature pages by facsimile transmission or other electronic transmission (including email) shall
constitute effective execution and delivery of this Agreement as to the Parties and may be used in lieu of the original Agreement
for all purposes. Signatures of the Parties transmitted by facsimile transmission or other electronic transmission (including
email) shall be deemed to be their original signatures for all purposes.

 

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13.
Attorneys’ Fees. In the event of any arbitration or action at law or in equity to enforce or interpret the terms
of this Agreement, the Parties agree that the Party who is awarded the most money shall be deemed the prevailing Party for all
purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid
by such prevailing Party in connection with the arbitration, litigation and/or dispute without reduction or apportionment based
upon the individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s
or a court’s power to award fees and expenses for frivolous or bad faith pleading.

 

14.
No Reliance. Borrower acknowledges and agrees that neither Lender nor any of its officers, directors, members, managers,
equity holders, representatives or agents has made any representations or warranties to Borrower or any of its agents, representatives,
officers, directors, or employees except as expressly set forth in this Agreement and, in making its decision to enter into the
transactions contemplated by this Agreement, Borrower is not relying on any representation, warranty, covenant or promise of Lender
or its officers, directors, members, managers, equity holders, agents or representatives other than as set forth in this Agreement.

 

15.
Severability. If any part of this Agreement is construed to be in violation of any law, such part shall be modified to
achieve the objective of the Parties to the fullest extent permitted and the balance of this Agreement shall remain in full force
and effect.

 

16.
Entire Agreement. This Agreement and all other documents referred to herein, supersede all other prior oral or written
agreements between Borrower, Lender, its affiliates and persons acting on its behalf with respect to the matters discussed herein,
and this Agreement and the instruments referenced herein contain the entire understanding of the Parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither Lender nor Borrower makes any representation,
warranty, covenant or undertaking with respect to such matters.

 

17.
Amendments. This Agreement may be amended, modified, or supplemented only by written agreement of the Parties. No provision
of this Agreement may be waived except in writing signed by the Party against whom such waiver is sought to be enforced.

 

18.
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective
successors and assigns. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed
by Lender hereunder may be assigned by Lender to a third party, including its affiliates, in whole or in part. Borrower may not
assign this Agreement or any of its obligations herein without the prior written consent of Lender.

 

19.
Time of Essence. Time is of the essence of this Agreement.

 

20.
                                         Notices. Unless otherwise specifically provided for herein, all notices, demands
                                         or requests required or permitted under this Agreement to be given to Borrower or Lender
                                         shall be given at such address as has been previously provided to the other Party.

 

21.
Further Assurances. Each Party shall do and perform or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other Party may reasonably
request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions
contemplated hereby.

 

[Remainder
of page intentionally left blank]

 

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IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.

 

	 	BORROWER:
	 	 	 
	 	MGT
    CAPITAL INVESTMENTS, INC.
	 	 	                 
	 	By:	 
	 	Name:
    	 
	 	Title:	 
	 	 	 
	 	MGT
    MINING TWO, INC.
	 	 	 
	 	By:	 
	 	Name:
    	 
	 	Title:	 

 

	 	LENDER:
	 	 	 
	 	UAHC
    VENTURES LLC
	 	 	 
	 	By:
    	United
    American Healthcare Corporation
	 	 	 
	 	By:
    	 
	 	 	John
    M. Fife, President

 

	ACKNOWLEDGED
    AND AGREED 	 
	WITH
    RESPECT TO SECTION 6 ONLY:	 
	 	 	 
	ILIAD
    RESEARCH AND TRADING, L.P.	 
	 	 	 
	By:	Iliad
    Management, LLC, its General Partner	 
	 	 	 
	By:	Fife
    Trading, Inc., its Manager	 
	 	 	 
	By:	 	 
	 	John
    M. Fife, President	 

 

[Signature
Page to Settlement Agreement]

 

    	 

     

    

 

EXHIBIT
A

 

CONVERSION
NOTICEExhibit 10.1

 

REDWOOD TRUST, INC.

PERFORMANCE STOCK UNIT AWARD AGREEMENT

 

PERFORMANCE STOCK
UNIT AWARD AGREEMENT dated as of the __ day of ____, 20__ (the “Award Agreement”), by and between Redwood Trust,
Inc., a Maryland corporation (the “Company”), and ______, an employee of the Company (the “Participant”).

 

Pursuant to the Redwood
Trust, Inc. 2014 Incentive Award Plan (as it 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 a Performance
Stock Unit award 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 (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 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] percent ([200]%) 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
and/or paid to all or substantially all holders of the outstanding shares of Common Stock during the Performance Period (or, in
the event the Performance Period ends due to a Change in Control, during the period beginning on the date of this Award Agreement
and ending on the applicable vesting date) (such period, the “Dividend Vesting 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).

 

“Dividend
Reinvestment Factor” shall mean the number of shares of Common Stock that would have been acquired from the reinvestment
of cash dividends, if any, which have been declared and/or paid to all or substantially all holders of the outstanding shares of
Common Stock during the Dividend Vesting Period, with respect to one share of Common Stock outstanding on the first day of the
Dividend Vesting Period.   Such number of shares shall be determined cumulatively, for each cash dividend declared
and/or paid during the Dividend Vesting Period (beginning with the first cash dividend declared and/or paid during the Dividend
Vesting Period and continuing chronologically with each subsequent cash dividend declared and/or paid during the Dividend Vesting
Period (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 cash dividend
paid during the Dividend Vesting Period 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 payment date of such dividend (or if such payment date is subsequent
to the end of the Dividend Vesting Period, the Fair Market Value per share of Common Stock on the last day of the Dividend Vesting
Period).

 

     

     

    

 

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 the last day of the Performance
Period, 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 vested and credited to the Participant’s Deferral Account 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).  [In connection with
the delivery of Award Shares to the Participant, the Participant and the Company agree that delivery of such Award Shares shall
be net of a number of such shares which shall be forfeited by the Participant in order to satisfy the applicable tax withholding
obligation relating to such delivery to the Participant.]

 

		4.	Forfeiture of Performance Stock Units.   

 

(a)         Upon
(i) the Participant’s Retirement (as defined below) or (ii) the Participant’s Termination of Service as an Employee
by the Company without Cause (as defined below), in either case, prior to the expiration of the Performance Period, the Target
Shares shall be reduced on a pro-rata basis to reflect the number of days of employment completed during the period beginning on
the date of this Agreement and ending on [December 12, 2020], 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 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).

 

    -2-

     

    

 

For purposes of this
Award Agreement, “Cause” shall mean (i) the Participant’s material failure to substantially perform the reasonable
and lawful duties of his or her position for the Company, which failure shall continue for thirty (30) days after notice thereof
by the Company to the Participant; (ii) acts or omissions constituting gross negligence, recklessness or willful misconduct on
the part of the Participant in respect of the performance of his or her duties hereunder, his or her fiduciary obligations or otherwise
relating to the business of the Company; (iii) the habitual or repeated neglect of his or her duties by the Participant; (iv) the
Participant’s conviction of a felony; (v) 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) unauthorized use or disclosure of trade secrets or confidential or proprietary information pertaining
to Company business.

 

For purposes of this
Award Agreement, “Retirement” shall mean a Termination of Service as an Employee due to retirement (as determined by
the Committee in its sole discretion) if such Termination of Service as an Employee (i) occurs on or after the completion by the
Participant of 10 years of employment with the Company (which employment need not be continuous), and (ii) the sum of the Participant’s
age and years of employment as an Employee equals or exceeds 70 (in each case measured in years, rounded down to the nearest whole
number).

 

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 in the employ or service 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 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.            
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.]

 

10.         
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.  Notwithstanding the foregoing, this Award Agreement is intended to comply with
Section 409A of the Code and this Award Agreement, the Plan and 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.

 

    -3-

     

    

 

11.         
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.

 

12.         
Withholding.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 shall withhold such amounts in satisfaction of such withholding obligations.

 

13.         
Section 409A. 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
	 	 	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.
	 	 
	 	 
	 	[Insert Participant Name]
	 	c/o Redwood Trust, Inc.
	 	One Belvedere Place, Suite 300
	 	Mill Valley, CA  94941

 

    -5-

     

    

 

Exhibit
A

Performance
Goals

 

Performance Period: The performance
period begins on [December 13, 2017] and ends on the earlier of (i) [December 12, 2020] 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, if any, shall be
determined based upon the Company’s cumulative total shareholder return (“TSR”, as defined below) for the Performance
Period in accordance with the following schedule:

 

	Total Shareholder Return Goal 
(“TSR Goal”)	 	% of Target Shares
    Creditable	 
	Less than [0]%	 	 	[0]	%
	[25]%	 	 	[100]	%
	[125]% or greater	 	 	[200]	%

 

If the actual performance results fall
between [0]% and [25]% TSR, or between [25]% and 125]% TSR, the actual number of Award Shares shall be determined based on a straight-line,
mathematical interpolation between the applicable percentages. In no event shall the number of Award Shares exceed [200]%
of the number of Target Shares.  In the event the TSR is equal to or less than [0]% at the end of the Performance Period,
all Award Shares shall become ineligible for crediting to the Participant’s Deferral Account and shall be forfeited.

 

Notwithstanding the foregoing paragraph,
in the event that a Change in Control occurs and the Participant either remains in continuous employment until immediately prior
to a Change in Control or experiences a Termination of Service as an Employee prior to a 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 Participation 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 Award Shares will be
determined by reference to the TSR Goal, pro-rated on an annualized basis to reflect the shortened Performance Period.

 

For example, if a Change in Control occurs
one year after the commencement date of a Performance Period, then the TSR Goal to earn [100]% of the Target Shares would equal
[7.72]% and the TSR Goal to earn [200]% of the Target Shares for such tranche would equal [31.04]%.

 

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 Award Shares that become eligible for vesting due to the Change in Control shall
remain outstanding and eligible to vest and be credited to the Participant’s Deferral Account on [December 12, 2020], subject
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 [December 12, 2020], then any 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 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 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.

 

    -6-

     

    

 

Definitions:

 

“TSR” shall mean,
for the Performance Period, the 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,

 

by,

 

(B) $______ [The average of the closing
prices of the Company’s Common Stock during the sixty (60) consecutive trading days ending on the day prior to the grant
date]

 

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

 

“Per Share Price” shall
mean the average of the closing prices of the 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 paid to all or substantially
all holders of the outstanding shares of Common Stock during the calculation period; provided, however, that for purposes
of calculating the 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.

 

“Valuation Date” means
[December 12, 2020]; provided, however, that in the event of a Change in Control that occurs prior to [December 12, 2020],
the Valuation Date shall mean the date of the Change in Control.

 

“Qualifying Termination” means a 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, if the Participant is party to an employment agreement
with the Company, by the Participant for Good Reason.

 

    -7-

     

    

 

 

 

Exhibit B

Deferral
Election 

 

[Attached]

 

 

    -8-

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