Document:

<PAGE>
                                                                   EXHIBIT 10.16

                            2002 REDWOOD TRUST, INC.
                          EMPLOYEE STOCK PURCHASE PLAN

1.      ESTABLISHMENT OF PLAN.

        Redwood Trust, Inc., a Maryland corporation (the "Company"), proposes to
grant options ("Options") for purchase of the Company's common stock, $0.01 per
share par value ("Common Stock"), to eligible employees of the Company and its
Designated Subsidiaries (as hereinafter defined) pursuant to this Employee Stock
Purchase Plan (this "Plan"). For purposes of this Plan, "parent corporation" and
"subsidiary" shall have the same meanings as "parent corporation" and
"subsidiary corporation" set forth in Sections 424 (e) and 424 (f),
respectively, of the Internal Revenue Code of 1986, as amended (the "Code"). The
Company intends this Plan to qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or successor provisions to
such Section), and the provisions of this Plan shall be construed as reasonably
necessary in order to effectuate such intent. Any term not expressly defined in
this Plan but defined for purposes of Section 423 of the Code shall have the
same definition herein.

2.      STOCK SUBJECT TO PLAN.

        A total of 100,000 shares of the Common Stock is reserved for issuance
under this Plan. Such number shall be subject to adjustments affected in
accordance with Section 16 of this Plan. Any shares of Common Stock that have
been made subject to an Option that cease to be subject to the Option (other
than by means of exercise of the Option), including, without limitation, in
connection with the cancellation or termination of an Option, shall again be
available for issuance in connection with future grants of Options under this
Plan.

3.      PURPOSE.

        The purpose of this Plan is to provide employees of the Company and its
designated subsidiaries, as that term is defined in Section 5 of this Plan
("Designated Subsidiaries"), with a convenient means of acquiring an equity
interest in the Company through payroll deductions, to enhance such employees'
sense of participation in the affairs of the Company and its Designated
Subsidiaries, to provide an incentive for continued employment with the Company
and its Designated Subsidiaries, to provide an additional form of tax-advantaged
compensation for employees, and to provide a performance incentive that will
inure to the benefit of all of the Company's stockholders.

4.      ADMINISTRATION.

        This Plan shall be administered by a committee (the "Committee")
appointed by the Company's Board of Directors (the "Board") consisting of at
least two members of the Board, each of whom is a "non-employee director" as
defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (unless the General Counsel of the Company shall have rendered a
written opinion to the Board that such composition of the Committee is not
required for the exemption under Rule 16b-3 to be available with respect to

                                       1
<PAGE>

purchases of Common Stock under the Plan), which shall be the Compensation
Committee of the Board if it satisfies such requirements. Subject to the
provisions of this Plan and the limitations of Section 423 of the Code or any
successor provision in the Code, the Committee shall have exclusive authority,
in its discretion, to determine all matters relating to Options granted under
this Plan, including all terms, conditions, restrictions, and limitations of
Options; provided, however, that all participants granted Options under an
offering pursuant to this Plan shall have the same rights and privileges within
the meaning of Code Section 423 (b) (5) except as required by applicable law.
The Committee shall also have exclusive authority to interpret this Plan and may
from time to time adopt rules and regulations of general application for this
Plan's administration. The Committee's exercise of discretion and interpretation
of this Plan, its rules and regulations, and all actions taken and
determinations made by the Committee pursuant to this Plan shall be conclusive
and binding on all parties involved or affected. The Committee may delegate
administrative duties to the Plan Financial Agent (defined in Section 12) or
such of the Company's officers or employees as it so determines (provided that
no such delegation may be made that would cause the purchase of Common Stock by
participants under this Plan to cease to be exempt from Section 16 (b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")). All expenses
incurred in connection with the administration of this Plan shall be paid by the
Company and the Designated Subsidiaries; provided, however, that the Committee
may require a participant to pay any costs or fees in connection with the sale
by the participant of shares of Common Stock acquired under this Plan or in
connection with the participant's request for the issuance of a certificate for
shares of Common Stock held in the participant's account under the Plan.

5.      ELIGIBILITY.

        Any employee of the Company or the Designated Subsidiaries is eligible
to participate in the Plan for any Offering Period (as hereinafter defined)
under this Plan except the following:

        (a) employees who have not been continuously employed by the Company or
Subsidiaries from the date of hire or rehire or of return from an unapproved
leave of absence for a period of at least three months before the beginning of
such Offering Period;

        (b) employees who are customarily employed for less than 20 hours per
week;

        (c) employees who are customarily employed for not more than five months
in a calendar year; and

        (d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424 (d) of the Code, own stock
or hold options to purchase stock possessing five percent or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries or who, as a result of being granted Options under this Plan,
would own stock or hold options to purchase stock possessing five percent or
more of the total combined voting power or value of all classes of stock of the
Company or any of its Subsidiaries.

        For all purposes of this Plan, the term Designated Subsidiaries shall
mean those Subsidiaries listed on Annex A to this Plan or Subsidiaries which may
hereafter be determined by the Committee or the Board to be Designated
Subsidiaries. A Designated Subsidiary will

                                       2
<PAGE>

cease to be a Designated Subsidiary on the earlier of (i) the date the Committee
or the Board determines that such Subsidiary is no longer a Designated
Subsidiary or (ii) such Designated Subsidiary ceases for any reason to be a
"parent corporation" or "subsidiary corporation" as defined in Sections 424 (e)
and 424 (f), respectively, of the Code.

6.      EFFECTIVE DATE; OFFERING AND PURCHASE PERIODS.

        The effective date of this Plan shall be July 1, 2002 (the "Effective
Date"). The offering periods of this Plan (individually, an "Offering Period")
shall consist of periods determined as described below not to exceed the maximum
period permitted by Section 423 of the Code. Until determined otherwise by the
Committee or the Board, (a) Offering Periods shall commence on each January 1
and continue for twelve months, provided, however, that the first Offering
Period shall begin on July 1, 2002 and continue for six months and the initial
Offering Period for any newly eligible employee that becomes a participant
during an otherwise ongoing Offering Period shall be deemed to begin on the
first day of the first Purchase Period after eligibility, and (b) each Offering
Period shall consist of one or more purchase periods (individually, a "Purchase
Period") during which payroll deductions of the participants are accumulated
under this Plan. Until otherwise determined by the Committee or the Board, each
Purchase Period shall be a three-month period commencing on each January 1,
April 1, July 1, and October 1, provided, however, that the first Purchase
Period shall commence with the first Offering Period on July 1, 2002. The first
day of each Offering Period is referred to as the "Offering Date". The last day
of each Purchase Period is referred to as the "Purchase Date". Subject to the
requirements of Section 423 of the Code, the Committee or the Board shall have
the power to change the duration of Offering Periods or Purchase Periods with
respect to future offerings if such change is announced at least 30 days prior
to the first day of the first Offering Period or Purchase Period to be affected
by such change.

7.      PARTICIPATION IN THIS PLAN.

        Eligible employees may become participants in an Offering Period under
this Plan as of the Purchase Period first commencing after satisfying the
eligibility requirements by delivering an enrollment form provided by the
Company to the Secretary of the Company or such other officer as he or she may
designate from time to time ("Redwood Plan Administrator") not later than the
15th day of the month (or if such day is not a business day for the Company or
the applicable Subsidiary, on the immediately preceding business day) before
commencement of such Purchase Period unless a later time for filing the
enrollment form authorizing payroll deductions is set by the Committee for all
eligible employees with respect to a given Purchase Period. Notwithstanding the
foregoing, for the initial Offering Period, commencing on the effective date,
the time for filing an enrollment form and commencing participation for
employees who satisfy the eligibility requirements as of the effective date
shall be determined by the Committee and communicated to such employees. Once an
employee becomes a participant in the Plan, such employee will automatically
participate in all Purchase Periods commencing after satisfying the eligibility
and enrollment requirements as set forth in the first sentence or second
sentence of this section unless the employee withdraws from this Plan or
terminates further participation in the Offering Period as set forth in Sections
13 and 14 below. Such participant is not required to file any additional
enrollment forms in order to continue participation in this Plan.

                                       3
<PAGE>

8.      GRANT OF OPTION ON ENROLLMENT.

        Enrollment by an eligible employee in this Plan with respect to an
Offering Period will constitute the grant by the Company to such employee as of
the relevant Offering Date of an Option to purchase on each relevant Purchase
Date up to that number of whole shares of Common Stock of the Company,
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during the Purchase Period ending on such Purchase Date by (b)
the Purchase Price as that term is defined in Section 9; provided, however, that
the number of shares which may be purchased pursuant to an Option may in no
event exceed (i) the number determined by dividing the amount of $6,250 by the
fair market value (as defined in Section 9) of a share of Common Stock on the
Offering Date, or (ii) such other maximum number of shares as may be specified
in the future by the Board or Committee in lieu of the limitation contained in
clause (i).

9.      PURCHASE PRICE.

        The purchase price per share (the "Purchase Price") at which a share of
Common Stock will be sold on any Purchase Date shall initially be the LOWER of
(a) 85 percent of the fair market value of such share on the first day of the
Offering Period in which such Purchase Date occurs or (b) 85 percent of the fair
market value of such share on the Purchase Date.

        For purposes of this Plan, the term "fair market value" of the Common
Stock on any date shall be the closing price on such date of the Common Stock
reported on the New York Stock Exchange or any national securities exchange on
which the Common Stock is listed. If there is no reported closing price of the
Common Stock on such date, then the "fair market value" shall be measured on the
next preceding trading day for which such reported closing price is available.
If there is no regular trading market for the Common Stock, the fair market
value of the Common Stock shall be as determined by the Committee in its sole
discretion, exercised in good faith. The Committee may change the manner in
which the Purchase Price is determined with respect to future Offering Periods
or Purchase Periods (provided such determination does not have the effect of
lowering the Purchase Price to an amount less than that which would be computed
utilizing the method for determining the Purchase Price set forth in the first
paragraph of this Section 9) if such changed manner of computation applied to
all eligible employees and is announced at least 30 days prior to the first day
of the first Offering Period or Purchase Period to be affected by such change.

10.     PURCHASE OF SHARES; CHANGES IN PAYROLL DEDUCTIONS;
        ISSUANCE OF SHARES.

        (a) Funds contributed by each participant for the purchase of shares
under this Plan shall be accumulated by regular payroll deductions made during
each Offering Period. The deductions shall be made in $50 increments as selected
by the Participant up to a maximum of not more than 15 percent of the
participant's Compensation. As used herein, "Compensation" shall mean all base
salary, wages, cash bonuses, commissions, current-pay dividend equivalent rights
("DERs"), and overtime; provided, however, that, for purposes of determining a
participant's Compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall be
treated as if the participant did not make such election. "Compensation" does
not include severance pay, hiring and relocation

                                       4
<PAGE>

allowances, pay in lieu of vacation, automobile allowances, imputed income
arising under any Company group insurance or benefit program, income received in
connection with stock options or other stock-based awards (other than
current-pay DERs), or any other special items of remuneration. Payroll
deductions shall commence on the first payday following the Offering Date and
shall continue through the last payday of the Offering Period unless sooner
altered or terminated as provided in this Plan.

        (b) A participant may lower (but not increase) the rate of payroll
deductions during a Purchase Period by filing with the Redwood Plan
Administrator a new authorization for payroll deductions, in which case the new
rate shall become effective for the next payroll period commencing more than 15
days after the Redwood Plan Administrator's receipt of the authorization and
shall continue for the remainder of the Offering Period unless changed as
described below. Such change in the rate of payroll deductions may be made at
any time during a Purchase Period, but not more than one change may be made
effective during any Purchase Period. Notwithstanding the foregoing, a
participant may lower the rate of payroll deductions to zero for the remainder
of the Purchase Period. A participant may increase or decrease the rate of
payroll deductions for any subsequent Purchase Period by filing with the Redwood
Plan Administrator a new authorization for payroll deductions not later than the
15th day of the month (or if such date is not a business day, the immediately
preceding business day) before the beginning of such Purchase Period. A
participant who has decreased the rate of withholding to zero will be deemed to
continue as a participant in the Plan until the participant withdraws from the
Plan in accordance with the provisions of Section 13. A participant shall have
the right to withdraw from this Plan in the manner set forth in Section 13
regardless of whether the participant has exercised his or her right to lower
the rate at which payroll deductions are made during an Offering Period.

        (c) All payroll deductions made for a participant will be credited to
his or her account under this Plan and deposited with the general funds of the
Company. No interest will accrue on payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

        (d) On each Purchase Date, provided that the participant has not
terminated employment in accordance with Section 14 or has not submitted to the
Redwood Plan Administrator a signed and completed withdrawal form, in either
case on or before the 15th day (or if such date is not a business day, on the
immediately preceding business day) of the last month of the Purchase Period in
accordance with Section 10(b) or Section 13 of this Plan, or the Plan has not
been terminated prior to the date referred to in the foregoing clause, the
Company shall apply the funds then in the participant's account to the purchase
at the Purchase Price of whole share(s) of Common Stock issuable under the
Option deemed granted to such participant with respect to the Offering Period to
the extent that such Option is exercisable on the Purchase Date; provided that
in no event shall an Option be deemed exercised (by applying funds to a
purchase) after the expiration of 27 months from the date such Option was deemed
granted under Section 8 hereof. Subject to Section 11, any funds remaining in
the participant's account will be applied to the following Purchase Period. No
fractional shares will be purchased.

                                       5
<PAGE>

        (e) During a participant's lifetime, such participant's Option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her Option
until such Option has been exercised.

11.     LIMITATIONS ON RIGHT TO PURCHASE.

        (a) No employee shall be granted an Option to purchase Common Stock
under this Plan at a rate which, when aggregated with his or her rights to
purchase stock under all other employee stock purchase plans of the Company or
any Subsidiary which is intended to meet the requirements of Code Section 423,
exceeds $25,000 in fair market value, determined as of the applicable date of
the grant of the Option, for each calendar year in which the employee
participates in this Plan (or any other employee stock purchase plan described
in this Section 11 (a)).

        (b) The number of shares which may be purchased by any employee on a
Purchase Date may not exceed the number of shares determined by dividing the sum
of $6,250 by the fair market value (as defined in Section 9) of a share of
Common Stock on the first day of the Offering Period in which such Purchase Date
occurs or, in the event the Committee or Board may specify a different
limitation to be applied in lieu of the foregoing limitation, then the number of
shares which may be purchased by any employee on a Purchase Date may not exceed
such other limitation.

        (c) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's Option to each participant affected
thereby.

        (d) Any payroll deductions accumulated in a participant's account which
are not used to purchase stock due to the limitations in this Section 11 shall
be returned to the participant as soon as practicable after the end of the
applicable Purchase Period without interest.

12.     EVIDENCE OF STOCK OWNERSHIP.

        (a) Promptly following each Purchase Date, the number of full shares of
Common Stock purchased by each participant shall be deposited into an account
established in the participant's name at a stock brokerage or other financial
services firm designated or approved by the Committee (the "Plan Financial
Agent"). A participant shall be free to undertake a disposition (whether by way
of sale, gift, or other transfer) of the shares in his or her account at any
time, subject to the Company's Insider Trading Policy and applicable securities
law rules and regulations, but, in the absence of such a disposition, the shares
must remain in the participant's account at the Plan Financial Agent until the
holding period set forth in Code Section 423 (a) has been satisfied. With
respect to full shares for which the Code Section 423(a) holding period has been
satisfied, the participant may move those shares to another brokerage account of
the participant's choosing or request that a stock certificate for full shares
be issued and delivered to him or her.

                                       6
<PAGE>

        (b) Following termination of a participant's employment for any reason,
the participant shall have a period of 60 days to notify the Plan Financial
Agent whether such participant desires (i) to receive a certificate representing
all full shares then in the participant's account with the Plan Financial Agent
and any cash being held for future purchases or (ii) to sell the shares in the
participant's account through the Plan Financial Agent. If the terminated
participant fails to file such notice with the Plan Financial Agent within 60
days after termination, he or she shall be deemed to have elected the
alternative set forth in clause (i) above, provided that the Plan Financial
Agent will continue to hold the terminated participant's certificates, on his or
her behalf, in an account no longer subject to this Plan, until otherwise
directed by such participant or determined by the Plan Financial Agent. However,
the participant shall not in any event receive a certificate representing shares
with respect to which the Code Section 423 (a) holding period has not been
satisfied until such holding period has been satisfied.

13.     WITHDRAWAL.

        (a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Redwood Plan Administrator a written
notice to that effect on a form provided for such purpose. Such withdrawal may
be elected at any time on or prior to the 15th day of the last month (or if such
date is not a business day, the immediately preceding business day) of a
Purchase Period.

        (b) Upon withdrawal from this Plan, the accumulated payroll deductions
of the participant not theretofore utilized for the purchase of shares of Common
Stock on a Purchase Date shall be returned to the withdrawn participant, without
interest, and his or her participation in this Plan shall terminate. In the
event a participant voluntarily elects to withdraw from this Plan, he or she may
not resume his or her participation in this Plan during the same Offering Period
unless otherwise determined by the Committee, but he or she may participate in
any subsequent Offering Period by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
this Plan.

14.     TERMINATION OF EMPLOYMENT; LEAVE OF ABSENCE.

        Termination of a participant's employment for any reason, including
retirement, death, or the failure of a participant to remain an eligible
employee, immediately terminates his or her participation in this Plan. In such
event, except as provided in Section 15, the payroll deductions credited to the
participant's account will be returned to him or her or, in the case of his or
her death, to his or her beneficiary or heirs, without interest. For purposes of
this Section 14, an employee will not be deemed to have terminated employment or
failed to remain in the continuous employ of the Company in the case of any
leave of absence permitted by applicable law or otherwise approved by the
Committee.

15.     RETURN OF PAYROLL DEDUCTIONS.

        In the event a participant's interest in this Plan is terminated by
withdrawal, termination of employment, or otherwise, or in the event this Plan
is terminated by the Board, the Company shall promptly deliver to the
participant all contributions of the participant to the Plan which have not yet
been applied to the purchase of stock unless such termination of participation
occurs later than the 15th day of the final month of any Purchase Period (or if
such date is not a business

                                       7
<PAGE>

day, on the preceding business day), in which event such contributions will be
utilized to purchase Common Stock for the participant. No interest shall accrue
on the payroll deductions of a participant in this Plan.

16.     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 maximum number and kind of
shares of stock subject to this Plan as set forth in Sections 1 and 2, the
number and kind of shares subject to outstanding Options, and the Purchase
Price. The determination by the Committee as to the terms of any of the
foregoing adjustments shall be conclusive and binding.

17.     NONASSIGNABILITY.

        Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive shares under this
Plan may be assigned, transferred, pledged, or otherwise disposed of in any way
(other than by will, the laws of descent and distribution, or as provided in
Section 24 hereof) by the participant. Any such attempt at assignment, transfer,
pledge, or other disposition shall be void and without effect.

18.     REPORTS AND STATUS OF ACCOUNTS.

        Individual accounts will be maintained by the Plan Financial Agent for
each participant in this Plan. The participant shall have all ownership rights
with respect to shares of Common Stock held in his or her account by the Plan
Financial Agent, including the right to vote such shares and to receive any
dividends or distributions which may be declared thereon by the Board. The Plan
Financial Agent shall send to each participant promptly after the end of each
Purchase Period a report of his or her account setting forth the total of shares
purchased, the total number of shares then held in his or her account, and the
market value per share. Neither the Company nor any Designated Subsidiary shall
have any liability for any error or discrepancy in any such report.

19.     NO RIGHTS TO CONTINUED EMPLOYMENT; NO IMPLIED RIGHTS.

        Neither this Plan nor the grant of any Option hereunder shall confer any
right on any employee to remain in the employ of the Company or any Subsidiary
or restrict the right of the Company or any Subsidiary to terminate such
employee's employment. The grant of any Option hereunder during any Offering
Period shall not give a participant any right to similar grants thereafter.

                                       8
<PAGE>

20.     EQUAL RIGHTS AND PRIVILEGES.

        All eligible employees shall have equal rights and privileges with
respect to this Plan except as required by applicable law so that this Plan
qualifies as an "employee stock purchase plan" within the meaning of Section 423
or any successor provision of the Code and the related regulations. Any
provision of this Plan which is inconsistent with Section 423 or any successor
provision of the Code shall, without further act or amendment by the Company,
the Board, or the Committee, be reformed to comply with the requirements of
Section 423. This Section 20 shall take precedence over all other provisions in
this Plan.

21.     NOTICES.

        All notices or other communications by a participant to the Company
under or in connection with this Plan shall be deemed to have been duly given
when received in the form specified by the Company at the location, or by the
person, designated by the Company for the receipt thereof.

22.     AMENDMENT OF PLAN.

        This Plan may be amended by the stockholders of the Company. The Board
may also amend this Plan in such respects as it shall deem advisable; however,
stockholder approval will be required for any amendment that will increase the
total number of shares as to which Options may be granted under this Plan, or,
but for such shareholder approval, cause this Plan to fail to continue to
qualify as an "employee stock purchase plan" under Section 423 of the Code or
cause the purchase of shares thereunder to fail to be exempt from the provisions
of Section 16 (b) of the Exchange Act.

23.     TERMINATION OF THE PLAN.

        The Company's stockholders or the Board may suspend or terminate this
Plan at any time. Unless this Plan shall theretofore have been terminated by the
Company's stockholders or the Board, this Plan shall remain in full force and
effect until all shares reserved under Section 2 have been purchased pursuant to
the terms hereof.

24.     DESIGNATION OF BENEFICIARY.

        (a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under
this Plan in the event of such participant's death prior to delivery to him or
her (or to the Plan Financial Agent on his or her behalf) of such shares and
cash.

        (b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under this Plan who is living at
the time of such participant's death, the Company shall deliver such shares or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant or, if
no spouse, dependent, or relative

                                       9
<PAGE>

is known to the Company, to such other person as the Company may in good faith
determine to be the appropriate designee.

25.     CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON
        SALE OF SHARES.

        Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such shares pursuant thereto
shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of the New York Stock Exchange or any stock exchange upon which the
shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

26.     WITHHOLDING.

        The Committee shall have the right to make such provisions as it deems
appropriate to satisfy any obligation of the Company to withhold federal, state,
or local income or other taxes incurred by reason of the operation of the Plan.

27.     GOVERNING LAW.

        Except to the extent that provisions of this Plan are governed by
applicable provisions of the Code or any other substantive provision of federal
law, this Plan shall be construed in accordance with, and shall be governed by,
the substantive laws of the State of California without regard to any provisions
of California law relating to the conflict of laws.

                                       10
<PAGE>

                                     ANNEX A

                              LIST OF SUBSIDIARIES

                      Sequoia Mortgage Funding Corporation
                               RWT Holdings, Inc.
                        Redwood Commercial Funding, Inc.
                        Redwood Residential Funding, Inc.
                        Redwood Financial Services, Inc.
                        Sequoia Residential Funding, Inc.

                                       11<PAGE>
                                                                   EXHIBIT 10.17

                               REDWOOD TRUST, INC.
                      EXECUTIVE DEFERRED COMPENSATION PLAN

        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, 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

                                       1
<PAGE>

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.

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

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

                                       2
<PAGE>

               (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 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.

               (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

                                       3
<PAGE>

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.

               (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

                                       4
<PAGE>

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.

                      (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.

                                       5
<PAGE>

                      (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. 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.

                                       6
<PAGE>

                      (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.

                      (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.

                                       7
<PAGE>

        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 such Incentive Payment was granted; all other
shares paid to Participants shall be deemed to be issued and delivered pursuant
to this Plan. 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

                                       8
<PAGE>

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 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.

                                       9
<PAGE>

                      (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.

               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

                                       10
<PAGE>

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.

               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

                                       11
<PAGE>

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
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.

                                       12
<PAGE>

               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 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
<PAGE>

        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:

                      (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

                                       14
<PAGE>

                      (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 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,

                                       15
<PAGE>

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;

                      (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

                                       16
<PAGE>

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 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

                                       17
<PAGE>

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, 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.

                                       18
<PAGE>

        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                   Witness
Primary 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>
                   STOCK OPTION
------------------------------------------------                                   # OF GAIN
                # OF     EXERCISE     EXPIRATION     # OF ATTEST     # OF GAIN       SHARES
 GRANT DATE    SHARES     PRICE          DATE          SHARES          SHARES       DEFERRED
-----------    -----     --------     ----------     -----------     ---------      --------
<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-00042-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00042-of-00352.parquet"}]]