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                                                                   EXHIBIT 10.12

                                     TEKELEC

                            INDEMNIFICATION AGREEMENT

      This INDEMNIFICATION AGREEMENT (this "Agreement") is made on June 27, 2003
between Tekelec, a California corporation ("Tekelec"), and Martin A. Kaplan
("Indemnitee"), a member of the Board of Directors of Tekelec.

      WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors of publicly held
corporations unless they are protected by comprehensive policies of insurance or
indemnification, due, among other things, to the increased number of lawsuits
against such corporations and their directors, the attendant expense of
defending against such lawsuit, and the exposure of such directors to
unreasonably high damages;

      WHEREAS, present laws and interpretations are frequently too uncertain to
provide such directors with adequate, reliable knowledge of the legal risks to
which they may be exposed as a result of serving a corporation;

      WHEREAS, the Board of Directors has concluded that its directors should be
provided with the maximum available protection against inordinate risks in order
to insure that the most capable persons will be attracted to and remain in such
positions and, therefore, has determined to obligate itself contractually to
indemnify in a reasonable and adequate manner its directors and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against its directors as a result of their service to Tekelec;

      WHEREAS, applicable law empowers a corporation to indemnify persons
serving as a director, officer, employee or agent of the corporation or a person
who serves at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, or other
enterprise, and further empowers a corporation to purchase and maintain
insurance (on behalf of such persons) against liability which may be asserted
against him or incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to indemnify
him against such liability under the provisions of said laws;

      WHEREAS, the Board of Directors has concluded that, due to the high cost
and other negative features of the coverage under presently available directors
and officers liability insurance, it would not be in the best interests of its
shareholders for Tekelec to purchase and maintain such insurance at this time
and that its shareholders' interests would be better served by contracting to
indemnify its directors and officers;

      WHEREAS, Tekelec desires to have Indemnitee serve or continue to serve as
a director of Tekelec free from undue concern for unpredictable, inappropriate
or unreasonable claims for damages by reason of his being a director of Tekelec
or by reason of his decision or actions on its behalf, and Indemnitee desires to
serve, or to continue to serve (provided that he is furnished the indemnity
provided for hereinafter), in such capacity; and
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      WHEREAS, the parties believe it appropriate to memorialize and reaffirm
Tekelec's indemnification obligations to Indemnitee and, in addition, to set
forth the agreements contained herein.

      NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties agree as follows:

      1. Agreement to Serve. Indemnitee will serve and/or continue to serve, at
the will of Tekelec or under separate contract, if such exists, as a director
faithfully so long as he is duly elected and qualified in accordance with the
provisions of the Bylaws of Tekelec or until such time as he tenders his
resignation in writing.

      2. Indemnification. Indemnitee shall be indemnified and held harmless by
Tekelec to the fullest extent permitted by its Articles of Incorporation, Bylaws
and applicable law, as the same exists or may hereafter be amended, against all
expenses, liability and loss (including attorneys' fees, judgments, fines and
amounts paid or to be paid in any settlement approved in advance by Tekelec,
which approval shall not unreasonably be withheld) (collectively, "Indemnifiable
Expenses"), which are not paid directly by an insurance carrier under a policy
of officers' and directors' liability insurance, or by Tekelec otherwise than
pursuant to this Agreement, and which are reasonably incurred or suffered by
Indemnitee in connection with the defense of any present or future threatened,
pending or completed investigation, claim, action, suit or proceeding, whether
civil, criminal, administrative or investigative, (i) to which Indemnitee was or
is a party or is threatened to be made a party by reason of conduct in
Indemnitee's capacity as a director of Tekelec, or (ii) with respect to which
Indemnitee is otherwise involved by reason of the fact that Indemnitee is or was
serving as a director of Tekelec, of any subsidiary, or is or was serving at the
request of Tekelec as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise (collectively,
"Indemnifiable Litigation"). Notwithstanding the foregoing, Indemnifiable
Litigation shall not be deemed to include actions or investigations brought
against Indemnitee for violation of Section 16 of the Securities Exchange Act of
1934 or for failure to qualify for an exemption under Section 4 of the
Securities Act of 1933.

      3. Interim Expenses; Undertaking to Repay.

            (a) Tekelec agrees to pay Indemnifiable Expenses incurred by
Indemnitee in connection with any Indemnifiable Litigation in advance of the
final disposition thereof unless a determination is reasonably and promptly made
by the Board of Directors by a majority vote of a quorum of disinterested
directors that, based upon the facts known to the Board at the time such
determination is made, Indemnitee acted in bad faith or in a manner that
Indemnitee did not believe to be in the best interests of Tekelec, or, with
respect to any action by or in the right of Tekelec to procure a judgment in its
favor, that Indemnitee acted in bad faith or in a manner Indemnitee did not
believe to be in the best interests of Tekelec and its shareholders, or, with
respect to any criminal proceeding, that Indemnitee believed or had reasonable
cause to believe his conduct was unlawful. In no event shall any advance be made
in instances where the Board of Directors reasonably determines that Indemnitee
deliberately breached his duty to Tekelec or its shareholders. In the

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event Indemnitee believes that such determination is wrongful, Indemnitee may
bring an action against Tekelec to recover advances in accordance with the
provisions of Section 4(a).

            (b) In regard to any payments made by Tekelec to Indemnitee pursuant
to the terms of this Section 3, Indemnitee hereby undertakes and agrees to repay
to Tekelec any and all amounts so paid promptly and in any event within ninety
(90) days after the disposition, including any appeals, of any litigation or
threatened litigation on account of which payments were made; provided, however,
to the extent that Indemnitee is entitled to be indemnified by Tekelec under
this Agreement, the Articles of Incorporation or Bylaws of Tekelec and/or under
applicable law, Indemnitee shall not be required to repay the amount as to which
he is determined to be entitled to indemnification. This undertaking shall not
affect in any manner any other rights which Indemnitee may have against Tekelec,
any insurer, or any other person to seek indemnification for or reimbursement of
any expenses referred to herein or any judgment which may be rendered in any
litigation or proceeding.

      4. Failure to Indemnify.

            (a) If a claim under this Agreement, under any statute, or under any
provision of Tekelec's Articles of Incorporation or Bylaws providing for
indemnification, is not paid in full by Tekelec within forty-five (45) days
after a written request for payment thereof has first been received by Tekelec,
Indemnitee may, but need not, at any time thereafter bring an action against
Tekelec to recover the unpaid amount of the claim and, if successful in whole or
in part, Indemnitee shall also be entitled to be paid for the reasonable
expenses (including attorneys' fees) of bringing such action.

            (b) It shall be a defense to any such action (other than an action
brought to enforce a claim under Section 3(a) for Indemnifiable Expenses
incurred in connection with Indemnifiable Litigation in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for Tekelec to indemnify Indemnitee for the
amount claimed. It is the parties' intention that if Tekelec contests
Indemnitee's right to indemnification or to receive payments pursuant to Section
3(a), the question of Indemnitee's right to indemnification shall be for the
court to decide, and neither the failure of Tekelec (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of conduct required by applicable law, nor an
actual determination by Tekelec (including its Board of Directors, any committee
or subgroup of the Board of Directors, independent legal counsel or its
shareholders) that Indemnitee has or has not met the applicable standard of
conduct.

      5. Successors. This Agreement establishes contract rights which shall be
binding upon, and shall inure to the benefit of, the successors, assigns, heirs
and legal representatives of the parties hereto, and which shall continue after
Indemnitee ceases to hold a position or have a relationship with Tekelec.

      6. Contract Rights Not Exclusive. The contract rights conferred by this
Agreement shall be in addition to, but not exclusive of, any other right which
Indemnitee may have or may

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hereafter acquire under any statute, provision of Tekelec's Articles of
Incorporation or Bylaws, agreement, vote of shareholders or directors or
otherwise.

      7. Indemnitee's Obligations. Indemnitee shall promptly advise Tekelec in
writing of the institution of any investigation, claim, action, suit or
proceeding which is or may be subject to this Agreement and shall keep Tekelec
generally informed of and consult with Tekelec with respect to the status of any
such investigation, claim, action, suit or proceeding.

      8. Severability. Should any provision or section of this Agreement, or any
clause thereof, be held to be invalid, illegal or unenforceable, in whole or in
part, the remaining provisions, sections and clauses of this Agreement shall
remain fully enforceable and binding on the parties.

      9. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties thereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver.

      10. Choice of Law. The validity, interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California.

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

                                         TEKELEC

                                         By:   /s/ Frederick M. Lax
                                            ------------------------------------
                                               Frederick M. Lax, President
                                               and Chief Executive Officer
Attest:

  /s/ Ronald W. Buckly
----------------------------------
Secretary

                                         INDEMNITEE

                                           /s/ Martin A. Kaplan
                                         ---------------------------------------
                                         Martin A. Kaplan

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                                                                 EXHIBIT 10.17.1

                               REDWOOD TRUST, INC.
                      EXECUTIVE DEFERRED COMPENSATION PLAN

                          (AMENDED THROUGH MAY 8, 2003)

         The Board of Directors of Redwood Trust, Inc. a corporation,
("Company") has adopted this Executive Deferred Compensation Plan ("Plan")
effective June 1, 2002.

         1.       PURPOSE

         The primary purpose of the Plan is to provide the opportunity to defer
compensation to a select group of management, highly compensated employees and
independent directors. The plan is intended to be a top-hat plan described in
Section 201(2) of the "ERISA".

         2.       DEFINITIONS AND CAPITALIZED TERMS

         The capitalized terms, set forth in alphabetical order defined below,
are used throughout the Plan.

                  (a)      "Annual Base Salary" refers to the term defined in
                           Section 5.2(a)

                  (b)      "Annual Bonus" refers to the term defined in Section
                           5.2(b).

                  (c)      "Beneficiary" refers to the term defined in Section
                           8.5.

                  (d)      "Board" or "Board of Directors" refers to the Board
                           of Directors of the Company.

                  (e)      "Cash DERs" refers to DERs payable in cash.

                  (f)      "Change of Control" refers to the occurrence of any
                           of the following:

                           (1) any "person," as such term is used in Sections
13(d) and 14(d) of the Act (other than the Company; any trustee or other
fiduciary holding securities under an employee benefit plan of the Company; or
any company owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Stock of the Company)
becomes after the Effective Date the "beneficial owner" (as defined in Rule
13d-3 under the Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person any securities
acquired directly from the Company or its affiliates or in one or more
transactions approved or consented to by the Board) representing 25% or more of
the combined voting power of the Company's then outstanding securities; or

                           (2) during any period of two consecutive years (not
including any period prior to the Effective Date), individuals who at the
beginning of such period constitute the Board,

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and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in
clause (1), (3) or (4) of this definition) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute at least
a majority thereof; or

                           (3) a merger or consolidation of the Company with any
other corporation is consummated, other than (A) a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity), in combination
with the ownership of any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, at least 55% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or

                           (4) a sale or disposition by the Company of all or
substantially all of the Company's assets is consummated; or

                           (5) the stockholders of the Company approve a plan of
complete liquidation of the Company.

                  (g) "Code" refers to the Internal Revenue Code of 1986, as
amended from time to time.

                  (h) "Committee" refers to the Company's Compensation
Committee.

                  (i) "Company" refers to Redwood Trust, Inc. a Maryland
corporation and any of its subsidiaries.

                  (j) "Compensation" refers to Annual Base Salary, Annual Bonus,
Cash DERs, Incentive Payments, Retainers, Fees and such other bonuses and
incentive payments as may be designated by the Committee under Section 5.2(f).

                  (k) "Deferral" means an amount of Compensation deferred
pursuant to a Deferral Election.

                  (l) "Deferral Account" refers to the bookkeeping entries
established and maintained by the Company for the purpose of recording (i) the
amounts of Compensation deferred by a Participant, (ii) and interest and stock
accruals with respect to those amounts, and (iii) any distributions to a
Participant or Beneficiary.

                  (m) "Deferral Crediting Date" refers to the term defined in
Section 6.1.

                  (n) "Deferral Election" means a Participant's irrevocable
election to defer receipt of Compensation to a later Plan Year.

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                  (o) "DERs" shall mean Dividend Equivalent Rights.

                  (p) "Director" refers to any non-management director of the
Board of Directors of the Company.

                  (q) "Distribution Date" means the date or dates on which
Compensation being deferred will be distributed, as selected by the Participant
on the Deferral Election form. The term Distribution Date does not include other
dates on which amounts may be distributed to a Participant under the Plan such
as upon total disability, death, Unforeseeable Financial Emergency, or
termination of employment other than upon Retirement.

                  (r) "Effective Date" refers to June 1, 2002 with respect to
Compensation first earned, determined or payable after that date.

                  (s) "Employee" refers to any employee, within the meaning of
Section 3121(d) of the Code, who is highly compensated, has the title of Vice
President, President or Chief Executive Officer, or is otherwise a member of
management selected by the Committee to participate in this Plan. The Committee
shall determine whether an employee is to be considered highly compensated,
applying a definition with a dollar threshold at least as high as that set under
Section 401(a) of the Code from time to time with respect to qualified plans.
Where the Committee considers appropriate in applying the provisions of this
Plan, the term Employee shall include only persons who are Participants or
Inactive Participants under Plan.

                  (t) "ERISA" refers the Employee Retirement Income Security Act
of 1974, as amended from time to time.

                  (u) "Fees" refers to meeting and other fees payable to
Directors of the Company, in addition to Retainers.

                  (v) "GAAP" refers to generally accepted accounting principles,
applied on a consistent basis, stated in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants, or in statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by another entity or entities as may
be approved by a significant segment of the accounting profession.

                  (w) "Inactive Participant" refers to an Employee who has
elected to defer Compensation under the Plan during a previous Plan Year but who
does not defer any Compensation payable during the current Plan Year.

                  (x) "Incentive Payment" refers to any payment of the Company's
Common Stock due upon exercise of a non-qualified stock option or pursuant to a
deferred stock award under one of the stock-based incentive plans of the
Company.

                  (y) "Interest Account" means the account under which interest
is credited to a Participant's Deferral Account each Plan Year.

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                  (z) "Interim Period" means with respect to any payment made to
a Participant under the Plan, the period beginning January 1 of the year in
which such payment is made and ending on the date of such payment.

                  (aa) "Interim Rate of Return" is the rate that is credited on
amounts distributed from the Interest Account during a Plan Year for the period
from January 1 of such Plan Year to the date of distribution, as herein
provided. The Interim Rate of Return will be designated by the Committee for
each Deferral in the Deferral Election. In the absence of an alternative
designation by the Committee, the default Interim Rate of Return shall be 8% per
annum, as calculated on an actual daily uncompounded basis.

                  (bb) "Participant" refers to an Employee or Director who
elects to defer under the Plan part or all of his or her Compensation payable
during a Plan Year.

                  (cc) "Plan" means this Redwood Trust, Inc. Executive Deferred
Compensation Plan.

                  (dd) "Plan Year" refers to the period of 12 consecutive months
commencing on the first day of January of each year. The initial Plan Year shall
commence on the Effective Date of the Plan and end on the final day of December
of the same calendar year.

                  (ee) "Rate of Return" is the rate of return accrued with
respect to a Plan Year on amounts held in the Interest Account at the end of
such Plan Year. A specific formula for determining the Rate of Return
calculation will be designated by the Committee for each Deferral in the
Deferral Election. In the absence of an alternative designation by the
Committee, the default Rate of Return shall be the average economic return - as
calculated annually for each calendar year of the Company (or, in the case of
the initial Plan Year, for the period beginning on July 1, 2002 and ending
December 31, 2002) - that the Company earned as a percentage of its entire
average capital base (including common, preferred, and other forms of equity,
that portion of long-term unsecured debt that has a remaining maturity of at
least one year past the end of the Plan year and is designated as capital by the
Committee, deferred amounts under this Plan, and other forms of capital that may
be designated by the Committee) before overhead, before variable stock option
expense, and before payments made to capital (such as dividends, interest
payments on debt designated as capital, and accruals for the deferred amounts
under the Plan), less 1%. In no case shall the rate of return for a Plan year be
less than 0%. The Committee shall, in good faith, estimate a reasonable measure
of the Company's average pre-overhead marginal economic return on capital for
each year by examining the Company's results. In the absence of a different
determination by the Committee, the Company's GAAP accounting books shall be
deemed an adequate estimate of economic return and GAAP accounting numbers shall
be used to calculate the Rate of Return for the Plan. The Committee may adjust
or modify the Company's GAAP results, or use a different measure of results, in
order to achieve a better reasonable estimation of the Company's economic
returns for the year (or, in the case of the initial Plan Year, the applicable
portion thereof).

                  (ff) "Re-Deferral Election" means a Participant's irrevocable
election to extend a Distribution Date.

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                  (gg) "Retainer" refers to the annual fixed compensation
amount, payable in cash to Directors, for each fiscal year of the Company or
such portion thereof as they may serve as Directors.

                  (hh) "Retirement" means a Participant's amicable termination
of employment with the Company after employment with the Company (including any
subsidiary or affiliate of the Company) for an aggregate period of not less than
ten (10) years, or as otherwise defined by the Committee.

                  (ii) "Stock Equivalent Account" means the investment
alternative under which a Participant's Deferral Account is treated as if it is
invested in the Company's common stock.

                  (jj) "Unforeseeable Financial Emergency" refers to the term
defined in Section 8.7.

         3.       ADMINISTRATION

         The Plan shall be administered by the Committee, except as otherwise
expressly provided herein. The Committee shall have the powers set forth in the
Plan and the power to interpret its provisions. Any decisions of the Committee
shall be final and binding on all persons with regard to the Plan. The Committee
may delegate its authority hereunder to the President or any Vice President of
the Company or to such other officers of the Company as it may deem appropriate,
provided that no such officer shall be delegated authority to make decisions
with respect to his or her own Deferrals or Deferral Account.

         4.       ELIGIBILITY

         The Committee may, in writing from time to time, designate by name or
title those Employees and Directors of the Company who are eligible to
participate in the Plan for one or more Plan Years and the date upon which each
such Employee's or Director's participation my commence. All designated
Employees and Directors shall be notified in writing by the Board or the
Committee of their eligibility to participate. No Employee or Director shall be
entitled to participate in the Plan unless notified of their eligibility by the
Committee. If the Committee provides a Participant with written notice of
revocation of eligibility, the effective date of any such ineligibility shall be
the first day of the Plan Year in which the notice is received or the next
following Plan Year, as specified in the notice. A Participant's eligibility to
participate in the Plan does not confer upon the Participant any right to any
award, bonus, or other remuneration of any kind.

         5.       DEFERRAL OF COMPENSATION

                  5.1 Rules for Deferral Election. Any Employee or Director may
make irrevocable elections to defer receipt of their Base Salary, Annual Bonus,
Cash DERs, Incentive Payments, Retainers or Fees (each such election shall be
referred to as a "Deferral Election" and the amount deferred pursuant to such an
election the "Deferral") in accordance with the rules set forth below.

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                      (a) An Employee or Director shall be eligible to make a
Deferral Election only if he or she is an Employee or Director on the date such
election is made.

                      (b) For each Plan Year, an Employee or Director may make
no more than one Deferral Election for each year's Annual Base Salary, Annual
Bonus and Retainer. An Employee or Director may make such number of Deferral
Elections with respect to Cash DERs, Incentive Payments, or Fees as the
Committee may prescribe.

                      (c) All Deferral Elections must be made in writing on such
forms as the Committee may prescribe and must be received by the Committee no
later than the date specified by the Committee. In no event will the date
specified by the Committee with (i) respect to an Annual Base Salary or Retainer
be later than the end of the Plan Year preceding the Plan Year in which such
Compensation is anticipated to be paid or (ii) with respect to an Annual Bonus
be later than June 30 of the year the bonus is anticipated to be earned. Any
Deferral Election with respect to a Participant's Incentive Payments, Cash DERs,
or Fees, shall only apply to that portion of the foregoing remaining to be paid
after the date the Deferral Election is made.

                      (d) As part of each Deferral Election, the Employee or
Director must specify the Distribution Date or Dates on which the Deferral will
be paid. The Distribution Dates specified in an Employee's or Director's
Deferral Elections may, but need not necessarily, be the same for all Deferrals.
Except as provided in subsection (g) below, each Distribution Date is
irrevocable and shall apply only to that portion of the Participant's Deferral
Account which is attributable to that Deferral.

                      (e) Except for lump sum distributions at Retirement, a
Distribution Date must be May 1, so as to provide for the final audit and
reporting of performance for the prior year to be completed.

                      (f) The earliest Distribution Date selected by an Employee
or Director for any Compensation deferred under the Plan shall not be earlier
than the May 1 that occurs 16 months after the end of the Plan Year during which
the Deferral Crediting Date for such Compensation occurs.

                      (g) A Participant may elect to extend the Distribution
Date or Dates and/or change the method of payment (lump sum or installments)
relating to any Deferral Election (a "Re-Deferral Election"); provided, that no
Re-Deferral Election shall be effective unless (i) the Committee receives the
election prior to the December 31 of the Plan Year preceding the Plan Year in
which the first Distribution Date to be changed occurs, and (ii) any new first
Distribution Date is at least one year later than the initial first Distribution
Date or constitutes a Distribution Date for a lump sum distribution following
Retirement. No Deferral Election may be made the subject of more than one
Re-Deferral Election to extend the Distribution Date or Dates and, in addition,
one Re-Deferral Election to change the method of payment. All Re-Deferral
Elections must be made in writing on such forms and pursuant to such rules as
the Committee may prescribe.

                      (h) As part of each Deferral Election, an Employee or
Director must elect the form in which the Deferral will be paid beginning on the
selected Distribution Date.

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The Deferral may be paid in a single lump sum or in annual installments over a
period not exceeding fifteen years as provided under Section 8.1. Except as
provided in subsection (g) above and Section 8.1, an Employee's or Director's
election as to the time and method of payment shall be irrevocable.

                      (i) As part of each Deferral Election, an Employee or
Director must elect the investment alternatives that shall apply to the Deferral
in accordance with Section 6.2.

                      (j) A Deferral Election shall be irrevocable; provided,
that (A) a Participant may elect to discontinue deferral of future unaccrued
Compensation (other than Annual Bonus and Incentive Payments) at any time during
the Plan Year and (B) if the Committee determines that a Participant has an
Unforeseeable Financial Emergency (as defined in Section 5.7) and such
Participant receives distributions from his or her Deferral Account as a result
thereof, then the Participant's Deferral Elections then in effect shall be
revoked with respect to all future accrued Compensation (other than Annual Bonus
and Incentive Payments) covered thereby. A Participant that elects to
discontinue deferrals under (A) above will not be eligible to make a new
Deferral Election with respect to such type of Compensation until the next
applicable date specified for such type of Compensation under subsection (c)
above.

                      (k) Notwithstanding any provision to the contrary in this
Section 5.1, a Participant may make a Deferral Election (i) with respect to
unearned Annual Base Salary or Retainer for the year 2002 no later than the 30th
day after the Effective Date of the Plan and (ii) with respect to unearned
Annual Base Salary, Annual Bonus or Retainer for the year in which the
Participant first becomes eligible to participate in the Plan, no later than the
30th day after the date such Participant becomes eligible to participate in the
Plan.

                      (l) Notwithstanding any other provision of the Plan, the
Committee may refuse, in its sole discretion, to accept any Deferral Election
from a Participant regardless of such Participant's eligibility to participate
in the Plan at the time.

                  5.2 Amounts Deferred. An Employee or Director may make a
Deferral Election to defer receipt of the following amounts:

                      (a) All or any portion of the Employee's Annual Base
Salary. "Annual Base Salary" shall mean the regular rate of compensation to be
paid to the Employee for services rendered during the Plan Year excluding
severance or termination payments, commissions, foreign service payments,
payments for consulting services and such other unusual or extraordinary
payments as the Committee may determine.

                      (b) All or any portion of the Employee's annual bonus for
a year due under an annual bonus plan or any other short-term incentive plan of
the Company (an "Annual Bonus").

                      (c) All or any portion of Cash DERs payable to the
Participant.

                      (d) All or any portion of Incentive Payments payable to
the Participant.

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                      (e) All or any portion of the Director's Retainer or Fees.

                      (f) Such other payments, bonuses, and incentive payments
under any plan or arrangement established by the Company or as the Committee may
designate as compensation eligible for deferral under this Plan in such
increments and subject to such limitations and restrictions as the Committee may
establish.

         6.       DEFERRAL ACCOUNTS

                  6.1 Deferral Accounts. All amounts deferred pursuant to a
Participant's Deferral Elections under the Plan shall be allocated to a
bookkeeping account in the name of the Participant ("Deferral Account") and the
Committee shall maintain a separate subaccount under a Participant's Deferral
Account for each Deferral. Deferrals shall be credited to the Deferral Account
as of the Deferral Crediting Date coinciding with or next following the date on
which, in the absence of a Deferral Election, the Participant would otherwise
have received the Deferral. A "Deferral Crediting Date" shall mean the business
day coinciding with or next following the date the Compensation being deferred
would otherwise have been received by the Participant.

                  6.2 Investment Alternatives. A Participant must make an
investment election at the time of each Deferral Election. The investment
election must be made in writing on such forms and pursuant to such rules as the
Committee may prescribe, subject to paragraph 6.3, and shall designate the
portion of the Deferral which is to be treated as invested in each investment
alternative. The two investment alternatives shall be as follows:

                      (a) Stock Equivalent Account. Under the Stock Equivalent
Account, the value of the Participant's Deferral shall be determined as if the
Deferral were invested in the Company's common stock as of the Deferral
Crediting Date. For all Deferrals other than Deferrals of Incentive Payments,
the number of shares of common stock equivalents to be credited to the
Participant's Deferral Account and appropriate subaccounts on each Deferral
Crediting Date shall be determined by dividing the Deferral to be "invested" on
that date by the closing price of the Company's common stock on the New York
Stock Exchange Composite Transaction Tape on the business day preceding the
Deferral Crediting Date ("Market Value"). Fractional stock equivalents will be
computed to two decimal places. In the case of Deferrals of Incentive Payments,
the number of shares of common stock equivalent shares to be credited to the
Deferral Account shall be the number of shares of common stock which would
otherwise have been payable under the Incentive Payment to the Participant on or
prior to the Deferral Crediting Date but as to which the Participant has elected
to defer delivery pursuant to the terms of the Plan. An amount equal to the
number of common stock equivalents multiplied by the dividend paid per share on
the Company's common stock on each dividend record date shall be payable in cash
to the Participant on the related dividend payment date. The Participant may
elect at the time of the Deferral Election to have such amount credited to the
Interest Account. Except as the Committee may otherwise permit upon request of
the Participant, the number of shares of the Company's common stock to be paid
to a Participant on a Distribution Date with respect to any Deferral subaccount
in the Stock Equivalent Account shall be equal to the number of common stock
equivalents accumulated in the Deferral subaccount as of such Distribution Date
divided by the total number of payments remaining to be made from such Deferral
subaccount. Shares of common stock paid in respect of an Incentive Payment
Deferral shall be deemed to be issued and delivered pursuant to the incentive
plan of the Company under which

                                       8
<PAGE>

such Incentive Payment was granted; all other shares paid to Participants shall
be deemed to be issued and delivered pursuant to the 2002 Redwood Trust, Inc.
Incentive Stock Plan as deferred stock awards thereunder. All payments from the
Stock Equivalent Account shall be made in whole shares of the Company's common
stock with fractional shares credited to federal income taxes withheld.

                      (b) Interest Account. Under the Interest Account, interest
will be credited to each subaccount in the Participant's Deferral Account once
per year as of each January 1 (a "Valuation Date"). The rate of interest to be
applied on each Valuation Date shall be the Rate of Return for the most recent
calendar year ended prior to such Valuation Date. The Rate of Return shall be
applied to the average balance in each subaccount during such prior fiscal year,
such average balance to be computed on an actual daily basis and excluding any
amounts distributed during such prior fiscal year to the Participant.
Calculation of the interest credits shall be made as soon as practicable
following the completion of the independent accountant's audit of the Company's
financial statements each year and the Committee's determination of the proper
Rate of Return for that year, and application of the interest credits will be
effective as of the applicable Valuation Date. Any Participant's distributions
made prior to the completion of the Committee's determination of the Rate of
Return shall be based upon the conservative estimate by the Chief Financial
Officer of the Company of the credits to be applied, if any, once the Committee
has determined the Rate of Return, and following the Committee's determination
of any adjustments necessary to reflect the proper credits will be made with the
Participant on May 1 of that year. With respect to the distribution of a
Deferral subaccount in the Interest Account, except as the Committee may
otherwise permit upon request of the Participant, the amount to be paid to the
Participant from such subaccount on a Distribution Date shall be the sum of (A)
an amount determined by dividing the balance in the subaccount as of the latest
Valuation Date (including interest accrued through the latest Valuation Date) by
the total number of payments remaining to be made from such Deferral subaccount
and (B) interest accrued during the Plan Year of distribution on the amount
determined under (A) for the Interim Period at the Interim Rate of Return. Each
lump sum payment, each installment payment and any other payment of balances in
the Participant's Interest Account shall be accompanied by an amount of accrued
interest on such payment at the Interim Rate of Return for the Interim Period.
All payments from the Interest Account shall be made in cash.

                  6.3 Investment Elections and Changes. A Participant's
investment elections shall be subject to the following rules:

                      (a) Except as provided in subsection (b) below with
respect to Incentive Payments that would have been paid in the form of the
Company's common stock, if the Participant fails to make an investment election
with respect to a Deferral, the Deferral shall be deemed to be invested in the
Interest Account.

                      (b) Any Deferral attributable to an Incentive Payment in
the form of the Company's common stock, restricted or otherwise, shall
automatically be deemed to be invested in the Stock Equivalent Account.

                      (c) Except as provided in subsection (b) above, with
respect to the Deferrals designated in a Deferral Election but not yet deferred
and invested under the Plan, a Participant may make a one-time, irrevocable
change per Deferral Election in the investment

                                       9
<PAGE>

election for all or a portion of the Deferrals covered by such Deferral Election
from the Interest Account to the Stock Equivalent Account or from the Stock
Equivalent Account to the Interest Account by filing an investment change
election with the Committee, provided that such investment change election shall
not be effective unless the election is received by the Committee prior to the
December 31 of the Plan Year preceding the Plan Year in which the first Deferral
Crediting Date with respect to such Deferrals is set to occur.

                      (d) With respect to the Deferrals designated in a Deferral
Election, a Participant may make a one-time, irrevocable election per Deferral
Election to transfer all or a portion of such Deferrals invested in the Interest
Account to the Stock Equivalent Account as of the first day of any calendar
quarter by filing an investment change election with the Committee, provided
that such investment change election shall not be effective unless the election
is received by the Committee prior to the date it is to become effective and
prior to the December 31 of the Plan Year preceding the Plan Year in which the
first Distribution Date with respect to the Deferral Election being changed is
set to occur. The amount elected to be transferred to the Stock Equivalent
Account shall be treated as invested in the Company's common stock equivalents
as of the first day of such quarter and the number of the shares of common stock
equivalents to be credited to the Participant's Deferral Account and appropriate
subaccounts as of such date shall be determined by dividing the amount to be
transferred by the Market Value on such date.

                  6.4 Vesting. Except as otherwise provided by the Committee at
the time of the Deferral Election, a Participant shall be fully vested at all
times in the balance of his Deferral Account. The Committee may condition awards
of Compensation from time to time on the Participant's consent to defer all or a
portion thereof under the Plan. The Committee may also establish vesting
requirements or other conditions with respect to awards of Compensation to be
deferred under the Plan, as specified in the Deferral Election form. For any
amounts deferred under the Plan that are subject to vesting requirements or
other conditions, the Committee shall specify how unvested balances are to be
treated under the Plan for purposes of interest accruals and dividend equivalent
payments as well as distributions of balances.

         7.       EFFECT ON EMPLOYEE BENEFITS

         Amounts deferred under this Plan or distributed pursuant to the terms
of this Plan are not taken into account in the calculation of an Employee's
benefits under any employee pension or welfare benefit program or under any
other compensation practice maintained by the Company, except to the extent
provided in such program or practice.

         8.       PAYMENT OF DEFERRAL ACCOUNTS

                  8.1 Time of Payment. Payment of a Participant's Deferral shall
be made in a single lump sum or shall commence in installments as elected by the
Participant in the Deferral Election. If a Participant's Deferral Account is
payable in a single lump sum, the payment shall be made as soon as practicable
following the applicable Distribution Date. If a Participant's Deferral is
payable in installment payments, then the Participant's Deferral shall be paid
in annual installments as determined under Section 6.2 over the period as
elected by the Participant in the Deferral Election commencing as soon as
practicable following the applicable Distribution Date.

                                       10
<PAGE>

                  8.2 Payment Upon Total Disability. In the event a Participant
becomes totally disabled before all amounts credited to his Deferral Account
have been paid, payment of the Participant's Deferral Account shall be made or
shall commence in the form of payment elected by the disabled Participant,
provided, that the disabled Participant requests payment in writing within 180
days of becoming disabled. If such a request is not made, the disabled
Participant's Deferrals will be paid pursuant to such Participant's Deferral
Elections and the normal provisions of the Plan. A Participant will be
considered to be totally disabled for purposes of the Plan if the Participant is
determined to be totally disabled under the Company's disability plan applicable
to the Participant.

                  8.3 Payment Upon Retirement or Other Termination of
Employment. A Participant's Deferral Account shall continue to be maintained for
the benefit of the Participant and Deferrals shall be paid in accordance with
the Participant's Deferral Elections in the event the Participant retires.
Following Retirement, a Participant will continue to have the right to make
Re-Deferral Elections and investment change elections as provided herein, to the
extent not exercised prior to Retirement. If the Participant terminates
employment with the Company for any reason other than Retirement, total
disability, or death before the entire balance in the Participant's Deferral
Account has been paid, the balance in the Deferral Account shall be distributed
in a single lump sum as soon as practicable.

                  8.4 Payment Upon Death of a Participant. In the event a
Participant dies before all amounts credited to his Deferral Account have been
paid, payment of the Participant's Deferral Account shall be made or shall
commence in the form of payment elected by the Participant's Beneficiary or the
Executor/Executrix of the Participant's estate, provided, that such party
submits a request in writing within 180 days of the Participant's death. If such
a request is not made, the deceased Participant's Deferrals will be paid to the
Beneficiary pursuant to such Participant's Deferral Elections and the normal
provisions of the Plan.

                  8.5 Beneficiary. A Participant's Beneficiary shall mean the
individual(s) or entity designated by the Participant to receive the balance of
the Participant's Deferral Account in the event of the Participant's death prior
to the payment of his entire Deferral Account. To be effective, any Beneficiary
designation shall be filed in writing with the Committee. A Participant may
revoke an existing Beneficiary designation by filing another written Beneficiary
designation with the Committee. The latest Beneficiary designation received by
the Committee shall be controlling. In the event a married Participant
designates someone other than his or her spouse as sole, primary beneficiary,
such initial designation or subsequent change shall be invalid unless the spouse
consents in a writing which names the designated Beneficiary. If no Beneficiary
is named by a Participant or if he survives all of his named Beneficiaries, the
Deferral Account shall be paid in the following order of precedence:

                      (a) the Participant's spouse or qualified domestic
partner;

                      (b) the Participant's children (including adopted
children), per stirpes; or

                      (c) the Participant's estate.

                                       11
<PAGE>

                  8.6 Form of Payment. The payment of that portion of a Deferral
deemed to be invested in the Interest Account shall be made in cash. The
distribution of that portion of a Deferral deemed to be invested in the Stock
Equivalent Account shall be distributed in whole shares of the Company's common
stock with fractional shares credited to federal income taxes withheld.

                  8.7 Unforeseeable Financial Emergency. If the Committee or its
designee determines that a Participant has incurred an Unforeseeable Financial
Emergency (as defined below), the Participant may withdraw in cash and/or stock
the portion of the balance of his Deferral Account needed to satisfy the
Unforeseeable Financial Emergency, to the extent that the Unforeseeable
Financial Emergency may not be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the Participant's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship. An "Unforeseeable Financial Emergency" is a severe financial hardship
to the Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or of a spouse or dependent of the Participant; (ii)
loss of the Participant's property due to casualty; or (iii) such other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant. A withdrawal on account of an
Unforeseeable Financial Emergency shall not exceed the amount reasonably needed
to satisfy the emergency. Withdrawals shall be paid as soon as possible
following the date on which the withdrawal is approved in writing by the
Committee setting forth the grounds therefor.

                  8.8 Early Withdrawal with Penalty. Notwithstanding the other
provisions of the Plan to the contrary, a Participant may request a withdrawal
from his Deferral Account by filing a request with the Committee or its designee
in writing. Payment will be made to the Participant within five days of the
approval of such a request. Any withdrawal under this provision will be charged
with a 10 percent early withdrawal penalty which will be withheld from the
amount withdrawn.

                  8.9 Withholding of Taxes. The Company shall withhold any
applicable Federal, state or local income tax from payments due under the Plan.
The Company shall also withhold any applicable Social Security taxes, including
the Medicare portion of such taxes, and any other employment taxes as necessary
in its view based on the advice of counsel to comply with applicable laws and
the Company's standard practices.

                  8.10 Small Amounts. Notwithstanding any election by a
Participant regarding the timing and manner of payment of his Deferrals, in the
event of a Participant's Retirement, death or total disability, the Employer may
elect to pay the Participant (or the Participant's Beneficiary) a lump sum
distribution of the entire value of the Participant's Deferral Account if the
value of such account is less than ten thousand dollars ($10,000) determined as
of the Valuation Date coinciding with or immediately following the Participant's
Retirement, death or total disability.

                  8.11 Income Tax Obligations. If a Participant is assessed
Federal, state or local income taxes by reason of, and computed on the basis of,
his or her undistributed deferred Compensation or undistributed interest accrued
on his or her Deferral Account, the Participant shall notify the Committee in
writing of such assessment and there shall be distributed from the Participant's
Deferral Account deferred Compensation or accrued interest in an amount equal to

                                       12
<PAGE>

such tax assessment, together with any interest due and penalties assessed
thereupon within 30 days following such notice; provided however, that if the
Committee determines that such assessment is improper, it may request that the
Participant contest the assessment, at the expense of the Company (which expense
shall include all costs of appeal and litigation, including legal and accounting
fees, and any additional interest assessed on the deficiency from and after the
date of the Participant's notice to the Committee); and during the period such
contest is pending, the sums otherwise distributable pursuant to this Section
8.11 shall not be distributed.

                  8.12 Capital Changes. In the event that at any time or from
time to time a stock dividend, stock split, spin-off, combination or exchange of
shares, recapitalization, merger, consolidation, distribution to stockholders
other than a normal cash dividend, or other change in the Company's corporate or
capital structure results in (a) the outstanding shares of common stock or any
securities exchanged therefor or received in their place being exchanged for a
different number or class of securities of the Company or of any other
corporation or (b) new, different, or additional securities of the Company or of
any other corporation being received by the holders of shares of common stock,
then the Committee, in its sole discretion, shall make such equitable
adjustments as it shall deem appropriate in the circumstances in the number and
kind of shares of stock equivalents contained in each Participant's Stock
Equivalent Account.

         9.       FUNDING

         Benefits payable under the Plan to any Participant shall be paid
directly by the Company. The Company shall not fund, or otherwise segregate
assets to be used for payment of benefits under, the Plan. Participants
acknowledge that the Company intends to use the amounts deferred under this Plan
as capital.

         10.      ACCOUNT STATEMENTS

         As soon as practical after May 1 of each calendar year (or after such
additional date or dates as the Committee, in its discretion, may designate),
each Participant shall be provided with a statement of the balance of his
Deferral Account hereunder as of the last day of the prior calendar year (or as
of such other dates as the Committee, in its discretion, may designate).

         11.      EMPLOYMENT RIGHTS

         Establishment of the Plan shall not be construed to give any Employee
the right to be retained in the Company's service or to any benefits not
specifically provided by the Plan. An Employee's election to participate in the
Plan shall not affect the rights of the Employee under any employee agreement,
stock option, or other incentive compensation agreement or to any other benefits
to which the Employee is entitled.

         12.      INTERESTS NOT TRANSFERABLE

         Except as to withholding of any tax under the laws of the United States
or any state or locality and the provisions of Section 13, no benefit payable at
any time under the plan shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, attachment or other legal process, or encumbrance
of any kind. Any attempt to alienate, whether currently or thereafter payable,
shall be void. No person shall, in any manner, be liable for or subject to the
debts or

                                       13
<PAGE>

liabilities of any person entitled to such benefits. If any person shall attempt
to, or shall alienate, sell, transfer, assign, pledge or otherwise encumber his
benefits under the Plan, or if by any reason of his bankruptcy or other event
happening at any time, such benefits would devolve upon any other person or
would not be enjoyed by the person entitled thereto under the Plan, then the
Committee, in its discretion, may terminate the interest in any such benefits of
the person entitled thereto under the Plan and hold or apply them for or to the
benefit of such person entitled thereto under the terms of this Plan or his
spouse, children or other dependents, or any of them, in such manner as the
Committee may deem proper.

         13.      FORFEITURE

         Unclaimed amounts shall consist of the amounts of the Deferral Account
of a Participant that are not distributed because of the Committee's inability,
after a reasonable search, to locate a Participant or his Beneficiary, as
applicable, within a period of two (2) years after the Distribution Date upon
which the payment of any benefits becomes due. No interest will be credited on
such amounts invested in the Interest Account following such Distribution Date
and no dividend equivalent payments will accrue on such amounts invested in the
Stock Equivalent Account after such Distribution Date. Unclaimed amounts shall
be forfeited at the end of such two-year period. These forfeitures will reduce
the obligations of the Company under the Plan and the Participant or
Beneficiary, as applicable, shall have no further right to his Deferral Account.

         14.      CONTROLLING LAW

         This plan shall be construed in accordance with the laws of the State
of California (exclusive of its rules regarding conflicts of law) to the extent
that such laws are not preempted by ERISA or other federal laws. If any
provision of this Plan shall be held illegal or invalid for any reason, such
determination shall not affect the remaining provisions of this Plan which shall
be construed as if said illegal or invalid provision had never been included.

         15.      ACTION BY THE COMPANY

         Except as otherwise specifically provided herein, any action required
of or permitted by the Company under the Plan shall be by resolution of the
Board of Directors of the Company or by action of any member of the committee or
person(s) authorized by resolution of the Committee.

         16.      AMENDMENT OR TERMINATION OF PLAN

                  (a) The Company intends the Plan to be permanent, but reserves
the right at any time by action of its Board of Directors to terminate the Plan.
The Board of Directors may also modify or amend the Plan and outstanding
Deferral Elections, provided, however, that any such modification or amendment
shall not reduce or eliminate any Deferral Account accrued through the date of
such modification or amendment or otherwise impair the rights of a Participant
under any Deferral Elections made prior to the date of such modification or
amendment without such Participant's consent. The Committee shall have the same
authority to modify or amend the Plan and outstanding Deferral Elections as the
Board of Directors of the Company in the following circumstances:

                                       14
<PAGE>

                      (i) to adopt amendments to the Plan and outstanding
Deferral Elections which the Committee determines are necessary or desirable for
the Plan and outstanding Deferral Elections to comply with or to obtain benefits
or advantages under the provisions of applicable law, regulations or rulings or
requirements of the Internal Revenue Service or other governmental or
administrative agency or changes in such law, regulations, rulings or
requirements; and

                      (ii) to adopt any other procedural or cosmetic amendment
that the Committee determines to be necessary or desirable that does not
materially change benefits to Participants or their Beneficiaries or materially
increase the Company's obligations under the Plan.

                  (b) The Committee shall provide notice of amendments adopted
by the Committee to the Board of Directors of the Company on a timely basis.

                  (c) This Plan shall terminate immediately if a court of
competent jurisdiction determines that this Plan is not exempt from the
fiduciary provisions of Part 4 of Title I of ERISA. The Plan shall terminate as
of the date it ceased to be exempt.

                  (d) This Plan shall terminate immediately upon the occurrence
of a Change of Control.

                  (e) Upon termination of the Plan, the Committee shall
distribute as soon as practicable following such termination all Deferral
Accounts, as determined by the Committee in a lump sum to all Participants.

         17.      MISCELLANEOUS

                  17.1 Alternative Acts and Times. If it becomes impossible or
burdensome for the Company or the Committee to perform a specific act at a
specific time required by this Plan, the Company or Committee may perform such
alternative act which most nearly carries out the intent and purpose of this
Plan and may perform such required or alternative act at a time as close as
administratively feasible to the time specified in this Plan for such
performance. Nothing in the preceding sentence shall allow the Company or
Committee to accelerate or defer any payments to Participants or Inactive
Participants under this Plan, except as otherwise expressly permitted herein.

                  17.2 Masculine and Feminine, Singular and Plural. Whenever
used herein, pronouns shall include both genders, and the singular shall include
the plural, and the plural shall include the singular, whenever the context
shall plainly so require.

                  17.3 Notices. Any notice from the Company or the Committee to
an Employee, Participant, Inactive Participant or Beneficiary regarding this
Plan may be addressed to the last known residence of said person as indicated in
the records of the Company. Any

                                       15
<PAGE>

notice to, or any service of process upon, the Company or the Committee with
respect to this Plan may be addressed as follows:

                             Chief Financial Officer
                               Redwood Trust, Inc.
                               591 Redwood Highway
                                   Suite #3100
                              Mill Valley, CA 94941

                  17.4 Facility of Payment. If the Committee, in its sole
discretion, determines that any Employee, Participant, Inactive Participant or
Beneficiary by reason of infirmity, minority or other disability, is physically,
mentally or legally incapable of giving a valid receipt for any payment due him
or her or is incapable of handling his or her own affairs and if the Committee
is not aware of any legal representative appointed on his or her behalf, then
the Committee, in its sole discretion, may direct (a) payment to or for the
benefit of the Employee, Director, Participant, Inactive Participant or
Beneficiary; (b) payment to any person or institution maintaining custody of the
Employee, Director, Participant, Inactive Participant or Beneficiary; or (c)
payment to any other person selected by the Committee to receive, manage and
disburse such payment for the benefit of the Employee, Director, Participant,
Inactive Participant or Beneficiary. The receipt by any such person of any such
payment shall be a complete acquittance therefore; and any such payment, to the
extent thereof, shall discharge the liability of the Company, the Committee, and
the Plan for any amounts owed to the Employee, Director, Participant, Inactive
Participant or Beneficiary hereunder. In the event of any controversy or
uncertainty regarding who should receive or whom the Committee should select to
receive any payment under this Plan, the Committee may seek instruction from a
court of proper jurisdiction or may place the payment (or entire Deferral
Account) into such court with final distribution to be deemed by such court.

                  17.5 Correction of Errors. Any crediting of Compensation or
interest accruals to the Deferral Account of any Employee, Director,
Participant, Inactive Participant or Beneficiary under a mistake of fact or law
shall be returned to the Company. If an Employee, Director, Participant,
Inactive Participant or Beneficiary in an application for a benefit or in
response to any request by the Company or the Committee for information, makes
an erroneous statement, omits any material fact, or fails to correct any
information previously furnished incorrectly to the Company or the Committee, of
if the Committee makes an error in determining the amount payable to an
Employee, Director, Participant, Inactive Participant or Beneficiary, the
Company or the Committee may correct its error and adjust any payment on the
basis of correct facts. The amount of any overpayment or underpayment may be
deducted from or added to the next succeeding payments, as directed by the
Committee. The Committee and the Company reserve the right to maintain any
action, suit or proceeding to recover any amounts improperly or incorrectly paid
to any person under the Plan or in settlement of a claim or satisfaction of a
judgment involving the Plan.

                  17.6 Status of Participants. In accordance with Revenue
Procedure 92-65 Section 3.01, this Plan hereby provides:

                       (a) Employees, Directors, Participants and Inactive
Participants under this Plan shall have the status of general unsecured
creditors of the Company;

                                       16
<PAGE>

                       (b) This plan constitutes a mere promise by the Company
to make benefit payments in the future; and

                       (c) It is the intention of the parties that the
arrangements under this plan shall be unfunded for tax purposes and for purposes
of Title I of ERISA.

                  17.7 Employee and Spouse Acknowledgement. By executing this
Plan document or related enrollment or election form, the undersigned Employee
or Director and, if Employee or Director is married, Employee's or Director's
spouse hereby acknowledge that each of them has read and understood this Plan
document. Employee or Director and his or her spouse also acknowledge that they
knowingly and voluntarily agree to be bound by the provisions of the Plan, as
amended from time to time, including those Plan provisions which require the
resolution of disputes by binding out-of-court arbitration. Employee or Director
and his or her spouse further acknowledge that they have had the opportunity to
consult with counsel of their own choosing with respect to all of the financial,
tax and legal consequences of participating in this Plan, including in
particular the effects of participation of any community property or other
interest which the Employee's spouse may have in the Compensation deferred under
this Plan.

                  17.8 Arbitration. Any claim or controversy between the parties
which the parties are unable to resolve themselves, including any claim arising
out of a Participant's employment or the termination of that employment, and
including any claim arising out of, connected with, or related to the formation,
interpretation, performance or breach of any provision of this Plan, and any
claim or dispute as to whether a claim is subject to arbitration, shall be
submitted to and resolved exclusively by expedited arbitration by a single
arbitrator in accordance with the following procedures:

                       (a) In the event of a claim or controversy subject to
this arbitration provision, the complaining party shall promptly send written
notice to the other party identifying the matter in dispute and the proposed
remedy. Following the giving of such notice, the parties shall meet and attempt
in good faith to resolve the matter. In the event the parties are unable to
resolve the matter within 21 days, the parties shall meet and attempt in good
faith to select a single arbitrator acceptable to both parties. If a single
arbitrator is not selected by mutual consent within 10 business days following
the giving of the written notice of dispute, an arbitrator shall be selected
from a list of nine persons each of whom shall be an attorney who is either
engaged in the active practice of law or a recognized arbitrator and who, in
either event, is experienced in serving as an arbitrator in disputes between
employers and employees, which list shall be provided by the main office of the
American Arbitration Association ("AAA") located in Marin County, California, or
the nearest office of the Federal Mediation and Conciliation Service. If, within
three business days of the parties' receipt of such list, the parties are unable
to agree upon an arbitrator from the list, then the parties shall each strike
names alternatively from the list, with the first to strike being determined by
the flip of a coin. After each party has had four strikes, the remaining name on
the list shall be the arbitrator. If such person is unable to serve for any
reason, the parties shall repeat this process until an arbitrator is selected.

                       (b) Unless the parties agree otherwise, within 60 days of
the selection of the arbitrator, a hearing shall be conducted before such
arbitrator at a time and a place in

                                       17
<PAGE>

Marin County agreed upon by the parties. In the event the parties are unable to
agree upon the time or place of the arbitration, the time and place within Marin
County shall be designated by the arbitrator after consultation with the
parties. Within 30 days of the conclusion of the arbitration hearing, the
arbitrator shall issue an award, accompanied by a written decision explaining
the basis for the arbitrator's award.

                       (c) In any arbitration hereunder, the Company shall pay
all administrative fees of the arbitration and all fees of the arbitrator,
except that the Participant or Beneficiary may, if he or she wishes, pay up to
one-half of those amounts. Each party shall pay its own attorneys' fees, costs,
and expenses, unless the arbitrator orders otherwise. The prevailing party in
such arbitration, as determined by the arbitrator, and in any enforcement or
other court proceedings, shall be entitled, to the extent permitted by law, to
reimbursement from the other party for all of the prevailing party's costs
(including but not limited to the arbitrator's compensation), expenses, and
attorneys' fees. The arbitrator shall have no authority to add to or to modify
this Plan, shall apply all applicable law, and shall have no lesser and no
greater remedial authority than would a court of law resolving the same claim or
controversy. The arbitrator shall, upon an appropriate motion, dismiss any claim
without an evidentiary hearing if the party bringing the motion establishes that
it would be entitled to summary judgment if the matter had been pursued in court
litigation. The parties shall be entitled to reasonable discovery subject to the
discretion of the arbitrator.

                       (d) The decision of the arbitrator shall be final,
binding, and non-appealable, and may be enforced as a final judgment in any
court of competent jurisdiction.

                       (e) This arbitration provision of the Plan shall extend
to claims against any parent, subsidiary, or affiliate of each party, and, when
acting within such capacity, any officer, director, shareholder, Participant,
Beneficiary, or agent of each party, or of any of the above, and shall apply as
well to claims arising out of state and federal statutes and local ordinances as
well as to claims arising under the common law or under this Plan.

                       (f) Notwithstanding the foregoing, and unless otherwise
agreed between the parties, either party may, in an appropriate matter, apply to
a court for provisional relief, including a temporary restraining order or
preliminary injunction, on the ground that the arbitration award to which the
applicant may be entitled may be rendered ineffectual without provisional
relief.

                       (g) Any arbitration hereunder shall be conducted in
accordance with the employee benefit plan claims rules and procedures of the AAA
then in effect; provided, however, that (i) all evidence presented to the
arbitrator shall be in strict conformity with the legal rules of evidence, and
(ii) in the event of any inconsistency between the employee benefit plan claim
rules and procedures of the AAA and the terms of this Plan, the terms of this
Plan shall prevail.

                       (h) If any of the provisions of this Section 17.8 are
determined to be unlawful or otherwise unenforceable, in whole or in part, such
determination shall not affect the validity of the remainder of this Section
17.8, and this Section 17.8 shall be reformed to the extent necessary to carry
out its provisions to the greatest extent possible and to insure that the
resolution of all conflicts between the parties, including those arising out of
statutory claims,

                                       18
<PAGE>

shall be resolved by neutral, binding arbitration. If a court should find that
the provisions of this Section 17.8 are not absolutely binding, then the parties
intend any arbitration decision and award to be fully admissible in evidence in
any subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.

                       (i) Arbitration of a Disability claim under this Section
17.8 shall (i) be considered one of the two levels of mandatory appeals
permitted under Department of Labor Regulation Section 2560.503-1 and (ii) shall
not preclude the claimant from challenging the decision of the arbitrator under
Section 502(a) of ERISA.

         17.9 Performance Based Compensation. It is intended that all Deferrals
that would have qualified as performance based compensation for purposes of
Section 162(m) of the Code if paid when originally due (without regard to the
Deferral Election), and all earnings on such Deferrals that are paid under this
Plan, qualify as performance based compensation under Section 162(m) of the Code
when and as actually paid in accordance with this Plan.

                                       19
<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                         DEFERRAL ELECTION (PAGE 1 OF 4)

================================================================================

1.       I acknowledge that the terms and conditions of the Redwood Trust, Inc.
         EXECUTIVE DEFERRED COMPENSATION PLAN have been explained to me,
         including the tax consequences of my decision to participate in the
         Plan. I understand that no ruling or determination letter has been
         obtained from the Internal Revenue Service that guarantees the deferral
         of income taxes on amounts deferred under the Plan.

2.       I agree to defer a portion of my Compensation (as defined in the Plan)
         and to have that income distributed to me at a later date pursuant to
         the terms and conditions of the Plan, which is incorporated by
         reference, in its entirety, in this Deferral Election Form.

3.       I understand that this Deferral Election Form is not an employment
         agreement, does not guarantee that I will receive any predetermined
         amount of compensation, and does not guarantee that I will receive any
         bonus, or incentive compensation.

4.       I understand that any Compensation I defer will be held as an asset of
         Redwood Trust, Inc., and will remain subject to the claims of the
         general creditors of Redwood Trust, Inc. I understand that I could lose
         all amounts deferred and I accept that risk.

ELECTION TO DEFER COMPENSATION

I hereby elect to defer the following amount(s):

% and/or $ of my salary paid in calendar year 20__. (Such deferrals will be made
in equal installments throughout the year on regular pay dates unless a separate
schedule is provided as part of this form and attached hereto.)

________ % and/or $________________ of my bonus earned in calendar year 20__ and
scheduled to be paid in the year thereafter.

________ % and/or $________________ of my director's retainer paid in calendar
year 20__.

________ % and/or $________________of my director's fees paid in the ____
calendar quarter(s) __ of year 20__.

________ % and/or $________________ of my Cash DER's paid in _____ calendar
quarter(s) of year 20__.

________ % and/or $________________ of other Compensation eligible for deferral
as described in an attachment hereto.

________ shares of stock representing gain resulting from a stock-for-stock
exercise of stock options. (For this election, you must also complete the
"Election to Defer Stock Option Gains" form)

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                         DEFERRAL ELECTION (PAGE 2 OF 4)

================================================================================

I understand that I may discontinue deferral of future Compensation at any time
during the Plan Year. I also understand that if I discontinue deferral of future
Compensation during the year, I cannot restart deferral until the beginning of
the succeeding calendar year or quarter, as applicable. The foregoing election
is voluntarily made by me after reviewing the terms of the Plan and with
knowledge that this Deferral Election is irrevocable until changed in accordance
with the terms of the Plan.

I wish to have my deferrals placed in the following account as described in and
subject to the terms of the Executive Deferred Compensation Plan:

___      INTEREST ACCOUNT
         The Rate of Return to be applied to amounts credited to the Interest
         Account in accordance with the terms of the Plan for Deferrals covered
         by this Deferral Election has been determined by the Committee to be:

         ___      the default rate set forth in the Plan; or
         ___      the rate described in the attachment hereto.

         The Interim Rate of Return to be applied to amounts distributed from
         the Interest Account in accordance with the terms of the Plan in
         respect of Deferrals covered by this Deferral Election has been
         determined by the Committee to be:

         ___      the default rate set forth in the Plan (8% per annum); or
         ___      the rate described in the attachment hereto.

___      STOCK EQUIVALENT ACCOUNT
         (Note that if shares of Stock are being deferred through a
         stock-for-stock option exercise, this is the only account option
         available.)

I wish to receive dividend equivalents on the above deferrals placed in my Stock
Equivalent Account:

___      In cash, or

___      Deferred into my Interest Account and subject to the other terms of
         this election.

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                         DEFERRAL ELECTION (PAGE 3 OF 4)

================================================================================

I wish to receive distributions as noted below:

___      SPECIFIED DISTRIBUTION DATE REQUEST

         I wish to receive payment in respect of all deferrals made pursuant to
         this Deferral Election in the following form:

         The earliest date for any distribution of any amount deferred is the
         May 1 that occurs 16 months after the end of the Plan year during which
         the Deferral Crediting Date for such deferred amount occurs.

         ____     (i)   lump sum, payable on May 1, ____;
         ____     (ii)  in annual installments beginning on May 1, ____.
                        The number of installments will be ___ (must be at least
                        2 and not exceed 15). The installments will be
                        calculated in accordance with the terms of the Plan
                        unless another payout schedule is specified and attached
                        hereto.

___      RETIREMENT DISTRIBUTION DATE REQUEST

         I wish to receive payment in respect of all deferrals made pursuant to
         this Deferral Election in the following form:

         ___      (i)   lump sum, payable as soon as practicable following my
                        Retirement from the Company;
         ___      (ii)  lump sum, payable on the first May 1 following my
                        Retirement from the Company;
         ___      (iii) in annual installments beginning on the first May 1
                        following my Retirement from the Company. The number of
                        installments will be ___ (must be at least 2 and not
                        exceed 15). The installments will be calculated in
                        accordance with the terms of the Plan unless another
                        payout schedule is specified and attached hereto.

___      EARLIER OF SPECIFIED DISTRIBUTION DATE REQUEST OR RETIREMENT
         DISTRIBUTION DATE REQUEST

         The method of payment will be as marked above for the earlier to occur
         of such requests.

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                         DEFERRAL ELECTION (PAGE 4 OF 4)

================================================================================

___      VESTING REQUIREMENTS OR OTHER CONDITIONS ON DISTRIBUTIONS

         Any vesting requirements or other conditions established by the
         Committee that must be satisfied prior to any distribution in respect
         of deferrals made pursuant to this Deferral Election are attached
         hereto.

THIS DEFERRAL ELECTION IS EXECUTED AND AGREED:

                                                                 (Election Date)
----------------------------------------------     --------------
(Signature)                                        (Date)

----------------------------------------------     -----------------------------
(Print Name)                                       (Social Security Number)

Agreed:

Redwood Trust, Inc.
Name:
     -----------------------------------------
Title:
      ----------------------------------------
Date:
     -----------------------------------------

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                             BENEFICIARY DESIGNATION

================================================================================

I.                                           (Insert Employee's/Director's name)
         -----------------------------------

II.      The above-named Participant's Beneficiary under the EXECUTIVE DEFERRED
         COMPENSATION PLAN is set forth below:

         Primary Beneficiary(ies):
                                      ------------------------------------------

         Relationship:
                                      ------------------------------------------

         Address:
                                      ------------------------------------------

         Social Security Number:
                                      ------------------------------------------

         Contingent Beneficiary(ies):
                                      ------------------------------------------

         Relationship:
                                      ------------------------------------------

         Address:
                                      ------------------------------------------

         Social Security Number:
                                      ------------------------------------------

III.     If no individual beneficiary named is living at the Participant's
         death, the Beneficiary shall be the executor(s) or administrator(s) of
         the Participant's estate.

IV.      This Beneficiary Designation revokes all prior designations and shall
         be effective as of the date it is filed with the Company. The
         Participant retains the right to revoke this Beneficiary Designation.

V. If the above-named Primary Beneficiary is someone other than the spouse of a
married Participant, the spouse of such Participant must execute this
Beneficiary Designation below.

Dated at                  , State of                     , on            , 20__.
        ------------------           --------------------     -----------

------------------------------------             -------------------------------
Signature of Participant                         Witness

------------------------------------             -------------------------------
Signature of Spouse (if not the Primary          Witness
Beneficiary)

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                              RE-DEFERRAL ELECTION

================================================================================

RE-DEFERRAL ELECTION

I wish to change the distribution election previously set forth under my
Deferral Election dated ___________, 2_______. I understand that I can make only
one change to extend the Distribution Date or Dates I initially selected and
only one change to the initial method of payment (lump sum or installments) that
I selected. All other terms of the Deferral Election will remain in effect. The
following is the amended distribution election.

___      SPECIFIED DISTRIBUTION DATE REQUEST

         I wish to receive payment in respect of all deferrals made pursuant to
         this Re-Deferral Election in the following form:

         ___      (i)   lump sum, payable on May 1, ____;
         ___      (ii)  in annual installments beginning on May 1, ____.
                        The number of installments is __ (must be at least 2 and
                        not exceed 15). The installments will be calculated in
                        accordance with the terms of the Plan unless another
                        payout schedule is specified and attached hereto.

___      RETIREMENT DISTRIBUTION DATE REQUEST

         I wish to receive payment in respect of all deferrals made pursuant to
         this Re-Deferral Election in the following form:

         ___      (i)   lump sum, payable as soon as practicable following
                        Retirement from the Company;
         ___      (ii)  lump sum, payable on the first May 1 following my
                        Retirement from the Company;
         ___      (iii) in annual installments beginning on the first May 1
                        following Retirement from the Company. The number of
                        installments is __ (must be at least 2 and not exceed
                        15). The installments will be calculated in accordance
                        with the terms of the Plan unless another payout
                        schedule is specified and attached hereto.

THIS RE-DEFERRAL ELECTION IS EXECUTED AND AGREED:

                                                                 (Election Date)
-------------------------------------         -------------------
(Signature)                                   (Date)

-------------------------------------         ----------------------------------
(Print Name)                                  (Social Security Number)

Agreed:

Redwood Trust, Inc.

Name:
     --------------------------------
Title:
      -------------------------------
Date:
     --------------------------------

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                           INVESTMENT CHANGE ELECTION

================================================================================

CHANGE IN INVESTMENT OPTION ON DEFERRALS

I wish to change the investment option previously set forth under my Deferral
Election dated ___________, 2_______. I understand this is a one-time,
irrevocable change to that Deferral Election. All other terms of that Deferral
Election remain in effect. I now opt:

(i)      to direct ___% of all future deferrals under that Deferral Election to
         the Interest Account and ___% to the Stock Equivalent Account,

(ii)     to direct $_______, or _____% of my existing deferrals under that
         Deferral Election that are currently invested in my Interest Account
         into the Stock Equivalent Account effective on the date specified in
         the Plan as set forth below.

THIS INVESTMENT CHANGE ELECTION IS EXECUTED AND AGREED:

                                                                 (Election Date)
----------------------------------------------     --------------
(Signature)                                        (Date)

----------------------------------------------     -----------------------------
(Print Name)                                       (Social Security Number)

Agreed:

Redwood Trust, Inc.
Name:
     -----------------------------------------
Title:
      ----------------------------------------
Date:
     -----------------------------------------

<PAGE>

================================================================================

                               REDWOOD TRUST, INC.

                      EXECUTIVE DEFERRED COMPENSATION PLAN

                      ELECTION TO DEFER STOCK OPTION GAINS

================================================================================

In accordance with the Redwood Trust, Inc. Executive Deferred Compensation Plan,
I irrevocably elect to defer the gain from the exercise of the stock options
listed in the table below to the extent therein indicated. In making this
election, I understand that:

o  These options may not be exercised before six months have passed since the
   date of this election.

o  The exercise price of these options must be paid to the Company through
   deemed delivery of shares of the Company's common stock that I already own
   using the attestation method.

o  The shares used for payment must have been owned by me for more than six
   months and must not have been used for another stock option exercise within
   the past six months or acquired pursuant to another compensation plan within
   the past 12 months.

o  Upon exercise of any of these options, my Stock Equivalent Account under the
   Plan will be credited with a number of stock equivalent units equal to the
   number of gain shares being deferred.

o  I understand that dividend equivalents will be paid on my stock equivalent
   units and that I can elect to receive them in cash or defer them into my
   Interest Account under the Plan as indicated on my Deferral Election form.

<Table>
<Caption>
                                                                                              # OF GAIN
                                                            # OF ATTEST       # OF GAIN        SHARES
                      STOCK OPTION                             SHARES          SHARES         DEFERRED
---------------------------------------------------------- --------------- ---------------- --------------
  GRANT DATE     # OF SHARES     EXERCISE     EXPIRATION
                                  PRICE          DATE
---------------- ------------- ------------- ------------- --------------- ---------------- --------------
<S>              <C>           <C>           <C>           <C>             <C>              <C>
---------------- ------------- ------------- ------------- --------------- ---------------- --------------

---------------- ------------- ------------- ------------- --------------- ---------------- --------------

---------------- ------------- ------------- ------------- --------------- ---------------- --------------

---------------- ------------- ------------- ------------- --------------- ---------------- --------------

---------------- ------------- ------------- ------------- --------------- ---------------- --------------

---------------- ------------- ------------- ------------- --------------- ---------------- --------------
                                                  TOTALS:

---------------- ------------- ------------- ------------- --------------- ---------------- --------------
</Table>

This election is subject to the terms of the Executive Deferred Compensation
Plan and the stock option plan and each stock option agreement under which the
respective options were granted.

I affirm that my decision to defer was not made in reliance upon any financial
or tax information or advice provided by the Company, and I understand that no
ruling or determination has been obtained from the Internal Revenue Service that
guarantees the deferral of income taxes under this program.

                                                                 (Election Date)
----------------------------------            -------------------
(Signature)                                   (Date)

----------------------------------            ----------------------------------
(Print Name)                                  (Social Security Number)

THIS FORM MUST BE COMPLETED AND RETURNED TO THE COMPANY AT LEAST 6 MONTHS PRIOR
                        TO EXERCISE OF ANY OPTION LISTED

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]