REDWOOD TRUST INC
EXHIBIT 10.10.1
<DOCUMENT>
<TYPE>EX-10.10.1
<SEQUENCE>3
<FILENAME>f90167exv10w10w1.txt
<DESCRIPTION>EXHIBIT 10.10.1
<TEXT>
<PAGE>

                                                                 EXHIBIT 10.10.1

                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT

           This AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"),
effective as of the 7th day of April, 2003 (the "Effective Date"), is entered
into by and between GEORGE E. BULL, III (the "Executive") and REDWOOD TRUST,
INC., a Maryland corporation (the "Company").

           The Company desires to establish its right to the continued services
of the Executive, in the capacity, on the terms and conditions, and subject to
the rights of termination hereinafter set forth, and the Executive is willing to
accept such employment in such capacity, on such terms and conditions, and
subject to such rights of termination. As of the Effective Date, this Agreement
wholly supersedes the Employment Agreement between the Executive and the Company
that was effective as of August 19, 1994.

           In consideration of the mutual agreements hereinafter set forth, the
Executive and the Company have agreed and do hereby agree as follows:

           1. EMPLOYMENT AS CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER OF
THE COMPANY. The Company does hereby employ, engage and hire the Executive as
Chairman of the Board and Chief Executive Officer of the Company, and the
Executive does hereby accept and agree to such hiring, engagement, and
employment. The Executive's duties as Chairman of the Board and Chief Executive
Officer shall be such executive and managerial duties as the Board of Directors
of the Company shall from time to time prescribe and as provided in the Bylaws
of the Company. The Executive shall devote such time, energy and skill to the
performance of his duties for the Company and for the benefit of the Company as
may be necessary or required for the effective conduct and operation of the
Company's business. Furthermore, the Executive shall exercise due diligence and
care in the performance of his duties to the Company under this Agreement.

           2. TERM OF AGREEMENT. The term of this Agreement (the "Term") shall
commence on the Effective Date and shall continue through December 31, 2005;
provided, however, that (i) on January 1, 2006 and each succeeding January 1,
the Term shall automatically be extended for one additional year unless, not
later than three months prior to any such January 1, either party shall have
given written notice to the other that it does not wish to extend the Term and
(ii) such one year extensions of the Term shall not occur on and after the
January 1 of the year in which the Executive will attain age sixty-five (65) but
instead the Term shall be extended only until the date of the Executive's
sixty-fifth (65th) birthday.

           3. COMPENSATION.

              (a) BASE SALARY. The Company shall pay the Executive, and the
Executive agrees to accept from the Company, in payment for his services to the
Company a base salary at the rate of $410,000 per year ("Base Salary"), payable
in equal biweekly installments or at such other time or times as the Executive
and Company shall agree. Base Salary shall be subject to such adjustments as the
Company and the Executive shall agree.


                                       1.
<PAGE>
              (b) PERFORMANCE BONUS - BOARD OF DIRECTORS DISCRETION. The
Executive shall be eligible to receive an annual bonus. The Compensation
Committee of the Company's Board of Directors (the "Compensation Committee") in
its discretion will determine whether such annual bonus will be paid, the amount
of such bonus and its form of payment. The Executive's target annual bonus
amount is 108% of his Base Salary (the "Target Bonus"). If the Compensation
Committee determines in its discretion that the Executive's performance meets or
exceeds the criteria established by the Compensation Committee for the award of
a Target Bonus, it may award Executive the Target Bonus or a higher amount.
Likewise, if the Executive's performance does not meet the criteria, the
Committee may award a lesser amount or no bonus may be awarded.

              (c) EQUITY INCENTIVE AWARDS. Executive shall be eligible to
receive grants of equity-based long-term incentive awards, including options to
purchase Company stock and Company restricted stock. Such awards shall be
determined in the discretion of the Compensation Committee. In the event of a
Change of Control (as defined in Section 2(f) of the Redwood Trust, Inc.
Executive Deferred Compensation Plan) in which the surviving or acquiring
corporation does not assume the Executive's outstanding stock options and
equity-related awards (including options and awards granted both before and
after the Effective Date) or substitute similar options and equity-related
awards, such options and equity-related awards shall immediately vest and become
exercisable if the Executive's service with the Company has not terminated
before the effective date of the Change of Control; provided, however, that the
foregoing provision shall only apply if the Company is not the surviving
corporation or if shares of the Company's common stock are converted into or
exchanged for other securities or cash.

              (d) ANNUAL REVIEW. The Company's Board of Directors shall, at
least annually, review the Executive's entire compensation package to determine
whether it continues to meet the Company's compensation objectives. Such annual
review will include a determination of (i) whether to increase the Base Salary
in accordance with Section 3(a); (ii) the incentive performance bonus to be
awarded in accordance with Section 3(b); and (iii) the amount and type of any
equity awards granted in accordance with Section 3(c).

           4. FRINGE BENEFITS. The Executive shall be entitled to participate in
any benefit programs adopted from time to time by the Company for the benefit of
its senior executive employees, and the Executive shall be entitled to receive
such other fringe benefits as may be granted to him from time to time by the
Company's Board of Directors.

              (a) BENEFIT PLANS. The Executive shall be entitled to participate
in any benefit plans relating to stock options, stock purchases, pension,
thrift, profit sharing, life insurance, medical coverage, education, or other
retirement or employee benefits available to other senior executive employees of
the Company, subject to any restrictions (including waiting periods) specified
in such plans and/or related individual agreements. The Company shall make
commercially reasonable efforts to obtain medical and disability insurance, and
such other forms of insurance as the Board of Directors shall from time to time
determine, for its senior executive employees.



                                       2.
<PAGE>
              (b) VACATION. The Executive shall be entitled to such number of
weeks of paid vacation per calendar year consistent with Executive's
satisfactory performance of the duties set forth in Section 1.

           5. BUSINESS EXPENSES. The Company shall reimburse the Executive for
any and all necessary, customary and usual expenses, properly receipted in
accordance with Company policies, incurred by Executive on behalf of the
Company.

           6. TERMINATION OF EXECUTIVE'S EMPLOYMENT.

              (a) DEATH. If the Executive dies while employed by the Company,
his employment shall immediately terminate. The Company's obligation to pay the
Executive's Base Salary shall cease as of the date of the Executive's death, and
any unpaid Base Salary shall be paid to the Executive's estate. In addition,
within fifteen (15) days of the Executive's death, the Company shall pay to the
Executive's estate an incentive performance bonus based on Executive's Target
Bonus then in effect, prorated for the number of days of employment completed by
the Executive during the year of his death. Executive's beneficiaries or his
estate shall receive benefits in accordance with the Company's retirement,
insurance and other applicable programs and plans then in effect. All stock
options or other equity-related awards, including restricted stock awards, shall
vest in full and, in the case of stock options, shall be exercisable for such
period as set forth in the applicable award agreement by which such awards are
evidenced.

              (b) DISABILITY. If, as a result of the Executive's incapacity due
to physical or mental illness ("Disability"), Executive shall have been absent
from the full-time performance of his duties with the Company for six (6)
consecutive months, and, within thirty (30) days after written notice is
provided to him by the Company, he shall not have returned to the full-time
performance of his duties, the Executive's employment under this Agreement may
be terminated by the Company for Disability. During any period prior to such
termination during which the Executive is absent from the full-time performance
of his duties with the Company due to Disability, the Company shall continue to
pay the Executive his Base Salary at the rate in effect at the commencement of
such period of Disability. Subsequent to such termination, the Executive's
benefits shall be determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs. In addition, within fifteen (15) days of such termination, the Company
shall pay to the Executive an incentive performance bonus based on Executive's
Target Bonus then in effect, prorated for the number of days of employment
completed by the Executive during the year in which his employment terminated.
The Executive, the Executive's beneficiaries or his estate shall receive
benefits in accordance with the Company's retirement, insurance and other
applicable programs and plans then in effect. All stock options or other
equity-related awards, including restricted stock awards, shall vest in full
and, in the case of stock options, shall be exercisable for such period as set
forth in the applicable award agreement by which such awards are evidenced.

              (c) TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate the Executive's employment under this Agreement for Cause, at any time
prior to expiration of the Term of the Agreement. For purposes of this
Agreement, "Cause" shall mean (i) the Executive's material failure to
substantially perform the reasonable and lawful duties of his



                                       3.
<PAGE>
position for the Company, which failure shall continue for thirty (30) days
after notice thereof by the Company to the Executive; (ii) acts or omissions
constituting gross negligence, recklessness or willful misconduct on the part of
the Executive in respect of his fiduciary obligations or otherwise relating to
the business of the Company; or (iii) the Executive's conviction of a felony
involving fraud, misappropriation or embezzlement. In such a case, the
Executive's employment under this Agreement may be terminated, and the Company's
obligation to pay the Executive's Base Salary, any bonus and fringe benefits
shall cease as of the termination date. However, the termination of Executive's
employment shall not be deemed to be for Cause unless and until there has been
delivered to Executive a copy of a resolution duly adopted by the Company's
Board of Directors (after reasonable notice is provided to Executive and
Executive is given an opportunity to be heard by the Company's Board of
Directors), finding that, in the good faith opinion of the Company's Board of
Directors, Executive's conduct met the standard for termination for Cause.

              (d) TERMINATION BY THE EXECUTIVE FOR GOOD REASON. The Executive
shall have the right to terminate this Agreement for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean the occurrence, without the
Executive's express written consent, of any one or more of the following events:

                  (i) (A) the Executive's not being either Chairman of the Board
or Chief Executive Officer of the Company, or if the Company is a subsidiary, of
the ultimate parent entity, except in connection with the Company's termination
of the Executive's employment for Cause pursuant to Section 6(c) or as otherwise
expressly contemplated herein; (B) the assignment of duties to the Executive not
consistent with being Chairman of the Board or Chief Executive Officer of the
Company, or if the Company is a subsidiary, of the ultimate parent entity; or
(C) the Executive's not reporting to the Company's Board of Directors, or if the
Company is a subsidiary, of the ultimate parent entity;

                  (ii) A reduction in the Executive's Base Salary or a material
reduction in the value of the Executive's total compensation package (salary,
bonus opportunity, equity incentive award opportunity and benefits) if such a
reduction is inconsistent with compensation trends for Chairmen of the Board and
Chief Executive Officers at comparable companies, or such reduction is not made
in proportion to an across-the-board reduction for all senior executives of the
Company and a Change of Control (as defined in Section 2(f) of the Redwood
Trust, Inc. Executive Deferred Compensation Plan) has not occurred;

                  (iii) The relocation of the Executive's principal Company
office to a location more than twenty-five (25) miles from its location as of
the Effective Date or the Company's requiring the Executive to be based anywhere
other than the Company's principal executive offices, except for required travel
on the Company's business to the extent necessary to fulfill the Executive's
obligations under Section 1;

                  (iv) A failure to re-elect the Executive as a member of the
Company's Board of Directors, or if the Company is a subsidiary, of the Board of
Directors of the ultimate parent entity;



                                       4.
<PAGE>
                  (v) A failure at any time to renew this Agreement for
successive one-year periods pursuant to Section 2;

                  (vi) The complete liquidation of the Company; or

                  (vii) In the event of a merger, consolidation, transfer, or
closing of a sale of all or substantially all the assets of the Company with or
to any other individual or entity, the failure of the Company's successor to
affirmatively adopt this Agreement or to otherwise comply with its obligations
pursuant to Section 13 below.

              (e) TERMINATION BY THE EXECUTIVE WITHOUT GOOD REASON. The
Executive may at any time during the Term terminate his employment hereunder for
any reason or no reason by giving the Company notice in writing not less than
one hundred twenty (120) days in advance of such termination. The Executive
shall have no further obligations to the Company after the effective date of
termination, as set forth in the notice. In the event of a termination by the
Executive under this Section 6(e), the Company will pay only the portion of Base
Salary or previously awarded bonus unpaid as of the termination date. Fringe
benefits which have accrued and/or vested on the termination date will continue
in effect according to their terms.

           7. COMPENSATION UPON TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE
OR BY THE EXECUTIVE FOR GOOD REASON.

              (a) If the Executive's employment shall be terminated by the
Company other than for Cause or by the Executive for Good Reason, the Executive
shall be entitled to the following benefits:

                  (i) PAYMENT OF UNPAID BASE SALARY. The Company shall
immediately pay the Executive any portion of the Executive's Base Salary or
previously awarded bonus not paid prior to the termination date.

                  (ii) PAYMENT OF BONUS. Within fifteen (15) days of such
termination, the Company shall pay to the Executive his Target Bonus pursuant to
Section 3(b), prorated for the number of days of employment completed by the
Executive during the year in which his employment terminated.

                  (iii) SEVERANCE PAYMENT. The Company shall provide the
Executive the following: (x) an amount equal to three (3) times Executive's Base
Salary as in effect immediately prior to his termination; (y) an amount equal to
three (3) times the Target Bonus amount in effect immediately prior to his
termination; and (z) with respect to options granted on or before December 31,
2002, the sum of the Dividend Equivalent Rights payments (as defined in the
applicable award agreement by which any such Dividend Equivalent Rights were
granted) that would have been payable to Executive over the three (3) year
period following his termination had he remained employed (taking into
consideration the term of options and Dividend Equivalent Rights and assuming
that the options are fully vested and remain unexercised). Payments pursuant to
this Section with respect to options granted after December 31, 2002 will be
calculated in the same manner, unless such options provide a different formula
for Dividend Equivalent Rights payments if Executive's employment is terminated
by the Company other than for Cause or by the Executive for Good Reason, in
which case the Dividend


                                       5.
<PAGE>
Equivalent Rights payments shall be governed by the terms of such options. The
quarterly dividend per share rate that shall be used in this calculation is the
higher of (I) one-fourth (25%) of the sum of common stock dividends declared per
common share in the twelve (12) months prior to the termination date, and (II)
one-twelfth (8.333%) of the sum of common stock dividends declared per common
share in the thirty-six (36) months prior to the termination date. The amounts
set forth in this Section 7(a)(iii)(x), 7(a)(iii)(y) and 7(a)(iii)(z) shall be
payable fifty percent (50%) within fifteen (15) days after the termination date,
and the remaining fifty percent (50%) shall be payable in twelve (12) equal
monthly installments beginning on the date fifteen (15) days after the
termination date and continuing on that same day of each of the eleven (11)
months thereafter.

                  (iv) STOCK OPTIONS AND OTHER EQUITY-RELATED AWARDS. All stock
options and other equity-related awards, including restricted stock awards, held
by the Executive as of the termination date shall vest in full and, in the case
of stock options, shall be exercisable for such period as set forth in the
applicable award agreements by which such awards are evidenced.

                  (v) CONTINUATION OF FRINGE BENEFITS. For the three (3) year
period following the termination of the Executive's employment, the Company
shall continue to provide the Executive with all life insurance, disability
insurance and medical coverage fringe benefits set forth in Section 4 as if the
Executive's employment under the Agreement had not been terminated; provided,
however, that such life insurance, disability insurance and medical coverage
shall cease as of the date the Executive receives such coverage from a
subsequent employer. No provision of this Agreement will affect the continuation
coverage rules under Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"), except that the Company's payment, if any, of applicable insurance
premiums will be credited as payment by the Executive for purposes of the
Executive's payment required under COBRA. Therefore, the period during which the
Executive may elect to continue the Company's medical plan coverage at the
Executive's own expense under COBRA, the length of time during which COBRA
coverage will be made available to the Executive, and all other rights and
obligations of the Executive under COBRA (except the obligation to pay insurance
premiums that the Company pays) will be applied in the same manner that such
rules would apply in the absence of this Agreement. For purposes of this Section
7(a)(v), any applicable insurance premiums that are paid by the Company shall
not include any amounts payable by the Executive under an Internal Revenue Code
Section 125 health care reimbursement plan, which amounts, if any, are the sole
responsibility of the Executive.

                  (vi) EXCISE TAX GROSS-UP. In the event that the Executive
becomes entitled to the payments and benefits provided under the provisions of
this Section 7 ("Payments and Benefits"), and if any of the Payments and
Benefits will be subject to any excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code"), or
successor sections thereto ("Excise Tax"), the Company shall pay to or for the
benefit of the Executive an additional amount (the "Gross-Up Payment") such that
the net amount retained by the Executive, after deduction of any Excise Tax on
the Payments and Benefits and any federal, state and local income tax and Excise
Tax upon the payments provided for under this Section 7(a)(vi), shall be equal
to the amount of the Payments and Benefits. For purposes of determining whether
any of the Payments and Benefits will be subject to the Excise


                                       6.
<PAGE>
Tax and the amount of such Excise Tax, (i) any other payments or benefits
received or to be received by the Executive that are contingent on a transaction
described in Section 280G(b)(2)(A)(i) of the Code or on an event, including
(without limitation) a termination of the Executive's employment that is
materially related to such a transaction (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in such a transaction, or any person affiliated with
the Company or such person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless, in the opinion of tax counsel selected by the Company
and reasonably acceptable to the Executive, such other payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
Section 280G(b)(4)(A) of the Code, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually rendered,
within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base
Amount (as defined in Section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax; (ii)
the amount of the Payments and Benefits which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total amount of the Payments
and Benefits or (B) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) of the Code (after applying clause (i), above); and (iii)
the value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
pay federal income taxes at the highest marginal rate of federal income taxation
in the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the termination date of employment, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes based on the marginal rate referenced
above. In the event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the termination date, the
Executive shall repay to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
imposed on the Gross-Up Payment being repaid by the Executive to the extent that
such repayment results in a reduction in Excise Tax and/or a federal, state or
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the termination of the Executive's employment (including by reason of any
payment, the existence or amount of which cannot be determined at the time of
the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest, penalties or additions payable by the
Executive with respect to such excess, but only to the extent that such
interest, penalties or additions would not have been reduced by prompt payment
by the Executive to the appropriate tax authority of the Gross-Up Payments
previously received) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Payments and Benefits.



                                       7.
<PAGE>
              (b) NO MITIGATION REQUIRED; NO OTHER ENTITLEMENT TO BENEFITS UNDER
AGREEMENT. The Executive shall not be required in any way to mitigate the amount
of any payment provided for in this Section 7, including, without limitation, by
seeking other employment, nor shall the amount of any payment provided for in
this Section 7 be reduced by any compensation earned by the Executive as the
result of employment with another employer after the termination date of
employment, or otherwise. Except as set forth in this Section 7, following a
termination governed by this Section 7, the Executive shall not be entitled to
any other compensation or benefits set forth in this Agreement, except as may be
separately negotiated by the parties and approved the Company's Board of
Directors in writing in conjunction with the termination of Executive's
employment under this Section 7.

              (b) RELEASE AGREEMENT. As a condition of receiving any of the
payments and benefits set forth in this Section 7, the Executive shall be
required to execute a mutual release agreement in the form attached hereto as
Exhibit A or Exhibit B, as appropriate, and such release agreement must have
become effective in accordance with its terms. The Company, in its sole
discretion, may modify the term of the required release agreement to comply with
applicable state law and may incorporate the required release agreement into a
termination agreement or other agreement with the Executive.

           8. DISPUTES RELATING TO EXECUTIVE'S TERMINATION OF EMPLOYMENT FOR
GOOD REASON. If the Executive resigns his employment with the Company alleging
in good faith as the basis for such resignation "Good Reason" as defined in
Section 6(d), and if the Company then disputes the Executive's right to the
payment of benefits under Section 7, the Company shall continue to pay the
Executive the full compensation (including, without limitation, his Base Salary)
in effect at the date the Executive provided written notice of such resignation,
and the Company shall continue the Executive as a participant in all
compensation, benefit and insurance plans in which the Executive was then a
participant, until the earlier of the expiration of the Term or the date the
dispute is finally resolved, either by mutual written agreement of the parties
or by application of the provisions of Section 11. For the purposes of this
Section 8, the Company shall bear the burden of proving that the grounds for the
Executive's resignation do not fall within the scope of Section 6(d), and there
shall be a rebuttable presumption that the Executive alleged such grounds in
good faith.

           9. NONCOMPETITION PROVISIONS.

              (a) NONCOMPETITION. The Executive agrees that during the Term
prior to any termination of his employment hereunder and for a period of one (1)
year following the occurrence of any event entitling the Executive to Payments
and Benefits, provided the Company makes all such payments when due according to
the provisions of Section 7, he will not, directly or indirectly, without the
prior written consent of a majority of the non-employee members of the Company's
Board of Directors, manage, operate, join, control, participate in, or be
connected as a stockholder (other than as a holder of shares publicly traded on
a stock exchange or the NASDAQ National Market System), partner, or other equity
holder with, or as an officer, director or employee of, any real estate
investment organization whose business strategy is competitive with that of the
Company, as determined by a majority of the non-employee members of the
Company's Board of Directors. It is further expressly agreed that the Company
will or would suffer irreparable injury if the Executive were to compete with
the Company or


                                       8.
<PAGE>
any subsidiary or affiliate of the Company in violation of this Agreement and
that Company would by reason of such competition be entitled to injunctive
relief in a court of appropriate jurisdiction, and the Executive further
consents and stipulates to the entry of such injunctive relief in such a court
prohibiting the Executive from competing with the Company or any subsidiary or
affiliate of the Company, in the areas of business set forth above, in violation
of this Agreement.

              (b) RIGHT TO COMPANY MATERIALS. The Executive agrees that all
styles, designs, lists, materials, books, files, reports, correspondence,
records, and other documents ("Company Materials") used, prepared, or made
available to the Executive shall be and shall remain the property of the
Company. Upon the termination of employment or the expiration of this Agreement,
all Company Materials shall be returned immediately to the Company, and the
Executive shall not make or retain any copies thereof.

              (c) SOLICITING EXECUTIVES. The Executive promises and agrees that
he will not directly or indirectly solicit any of the Company's executive
employees to work for any competing real estate investment organization as
determined under the preceding Section 9(a).

              (d) MARYLAND LAW. The Executive agrees, in accordance with
Maryland law, to first offer to the Company corporate opportunities learned of
solely as a result of his service as an officer and director of the Company.

           10. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax or first class mail,
certified or registered with return receipt requested, and shall be deemed to
have been duly given three (3) days after mailing or twenty-four (24) hours
after transmission of a fax to the respective persons named below:

           If to the Company:              Douglas B. Hansen
                                           President
                                           Redwood Trust, Inc.
                                           591 Redwood Highway, Suite 3100
                                           Mill Valley, CA 94941
                                           Phone: (415) 389-7373
                                           Fax: (415) 381-1773

           If to the Executive:            George E. Bull, III
                                           Chairman of the Board and
                                             Chief Executive Officer
                                           Redwood Trust, Inc.
                                           591 Redwood Highway, Suite 3100
                                           Mill Valley, CA 94941
                                           Phone: (415) 389-7373
                                           Fax: (415) 381-1773

Either party may change such party's address for notices by notice duly given
pursuant hereto.

           11. RESOLUTION OF DISPUTES. To ensure the rapid and economical
resolution of disputes that may arise in connection with the Executive's
employment with the Company, the


                                       9.
<PAGE>
Executive and the Company agree that any and all disputes, claims, or causes of
action, in law or equity, arising from or relating to the enforcement, breach,
performance, or interpretation of this Agreement, the Executive's employment, or
the termination of the Executive's employment ("Arbitrable Claims") shall be
submitted to confidential mediation in San Francisco, California conducted by a
mutually agreeable mediator from Judicial Arbitration and Mediation Services
("JAMS") or its successor, and the cost of JAMS' mediation fees shall be paid by
the Company. In the event that mediation is unsuccessful in resolving the
Arbitrable Claims, the Arbitrable Claims shall be resolved, to the fullest
extent permitted by law, by final, binding and confidential arbitration in San
Francisco, California conducted by JAMS or its successor, under the then
applicable rules of JAMS. THE EXECUTIVE ACKNOWLEDGES THAT BY AGREEING TO THIS
ARBITRATION PROCEDURE, BOTH THE EXECUTIVE AND THE COMPANY WAIVE THE RIGHT TO
RESOLVE ANY SUCH DISPUTE THROUGH A TRIAL BY JURY OR JUDGE OR ADMINISTRATIVE
PROCEEDING. The arbitrator shall: (a) have the authority to compel adequate
discovery for the resolution of the dispute and to award such relief as would
otherwise be permitted by law; and (b) issue a written arbitration decision
including the arbitrator's essential findings and conclusions and a statement of
the award. The arbitrator shall be authorized to award any or all remedies that
the Executive or the Company would be entitled to seek in a court of law,
including, without limitation, the award of attorneys' fees based on a
determination of the extent to which each party has prevailed as to the material
issues raised in determination of the dispute. The Company shall pay all JAMS'
arbitration fees in excess of those which would be required if the dispute were
decided in a court of law. Nothing in this Agreement is intended to prevent
either the Executive or the Company from obtaining injunctive relief in court to
prevent irreparable harm pending the conclusion of any such mediation or
arbitration.

           12. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates and
supersedes any and all prior agreements and understandings between the parties
with respect to employment or with respect to the compensation of the Executive
by the Company.

           13. ASSIGNMENT SUCCESSORS. This Agreement is personal in its nature,
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided, however, that, in the event of the merger, consolidation, transfer, or
sale of all or substantially all of the assets of the Company with or to any
other individual or entity, this Agreement shall, subject to the provisions
hereof, be binding upon and inure to the benefit of such successor and such
successor shall discharge and perform all the promises, covenants, duties, and
obligations of the Company hereunder.

           14. GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under and
in accordance with the laws of the State of California.

           15. ENTIRE AGREEMENT; HEADINGS. This Agreement embodies the entire
agreement of the parties with respect to the subject matter hereof, excluding
the plans and programs under which compensation and benefits are provided
pursuant to Sections 3 and 4 hereof to the extent such plans and programs are
not inconsistent with this Agreement, and may be modified only in writing.
Section headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.


                                      10.
<PAGE>
           16. WAIVER; MODIFICATION. Failure to insist upon strict compliance
with any of the terms, covenants, or conditions hereof shall not be deemed a
waiver of such term, covenant, or condition, nor shall any waiver or
relinquishment of, or failure to insist upon strict compliance with, any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power at any other time or times. This Agreement shall not be
modified in any respect except by a writing executed by each party hereto.

           17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.

           18. INDEMNIFICATION. The Company shall indemnify and hold Executive
harmless to the maximum extent permitted by Section 2-418 of the Maryland
General Corporations Law or its successor statute, or if greater, by the
Company's Bylaws, by any applicable resolution of the Company's Board of
Directors or by the terms providing the most extensive indemnification contained
in any written agreement between the Company and any director or officer of the
Company. The Company shall make Executive a named beneficiary under all director
and officer liability policies maintained by the Company from time to time for
the benefit of its directors and officers, entitled to all benefits provided
thereunder to persons serving in a comparable role as both an officer and
director of the Company.

           19. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

           20. SUCCESSOR SECTIONS. References herein to sections or rules of the
Code or Exchange Act shall be deemed to include any successor sections or rules.

           IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto signed
this Agreement, as of the Effective Date.



                                           REDWOOD TRUST, INC.

                                           By:
                                               ---------------------------------
                                               Mariann Byerwalter
                                               Chair, Compensation Committee


                                               ---------------------------------
                                               GEORGE E. BULL, III


                                      11.
<PAGE>
                                                         Individual  Termination


                                    EXHIBIT A

                                RELEASE AGREEMENT

           Except as otherwise set forth in this Release Agreement or in
Sections 7 and 18 of the Amended and Restated Employment Agreement between
George E. Bull, III and Redwood Trust, Inc., George E. Bull, III ("Executive")
hereby generally and completely releases the Company and its directors,
officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring at any time prior to and including the date Executive signs
this Release Agreement. The Company, its directors, officers, employees,
shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns, hereby releases
Executive and his heirs, executors, successors and assigns, from any and all
claims, liabilities and obligations, both known and unknown, that arise out of
or are in any way related to events, acts, conduct, or omissions occurring at
any time prior to and including the date the Company signs this Release
Agreement. This general mutual release includes, but is not limited to: (A) all
claims arising out of or in any way related to Executive's employment with the
Company or the termination of that employment; (B) all claims related to
Executive's compensation or benefits from the Company, including salary,
bonuses, commissions, vacation pay, expense reimbursements, severance pay,
fringe benefits, stock, stock options, or any other ownership interests in the
Company; (C) all claims for breach of contract, wrongful termination, and breach
of the implied covenant of good faith and fair dealing; (D) all tort claims,
including claims for fraud, defamation, emotional distress, and discharge in
violation of public policy; and (E) all federal, state, and local statutory
claims, including claims for discrimination, harassment, retaliation, attorneys'
fees, or other claims arising under the federal Civil Rights Act of 1964 (as
amended), the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) ("ADEA"), the federal
Employee Retirement Income Security Act of 1974 (as amended), and the California
Fair Employment and Housing Act (as amended); provided, however, that nothing in
this paragraph shall be construed in any way to release the Company from its
obligation to indemnify Executive pursuant to agreement, the Company's bylaws or
binding resolutions, or applicable law.

           Executive acknowledges that he is knowingly and voluntarily waiving
and releasing any rights he may have under the ADEA, and that the consideration
given under his Employment Agreement with the Company for the waiver and release
in the preceding paragraph hereof is in addition to anything of value to which
he was already entitled. Executive further acknowledges that he has been advised
by this writing, as required by the ADEA, that: (A) this waiver and release does
not apply to any rights or claims that may arise after the date Executive signs
this Release Agreement; (B) Executive should consult with an attorney prior to
signing this Release Agreement (although Executive may choose voluntarily not do
so); (C) Executive has twenty-one (21) days to consider this Release Agreement
(although Executive may choose voluntarily to sign this Release Agreement
earlier); (D) Executive has seven (7) days following the date that he signs this
Release Agreement to revoke the Release Agreement by providing written notice to
an officer of the Company; and (E) this Release Agreement shall not be effective
until the date upon

                                       1.
<PAGE>
                                                         Individual  Termination


which the revocation period has expired, which shall be the eighth day after
Executive signs this Release Agreement.

           Both Executive and the Company acknowledge that each has read and
understands Section 1542 of the California Civil Code which reads as follows: "A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Both
Executive and the Company hereby expressly waive and relinquish all rights and
benefits under that section and any law of any jurisdiction of similar effect
with respect to each party's release of any claims hereunder.



                                           EXECUTIVE

                                           Name:
                                                --------------------------------

                                           Date:
                                                --------------------------------



                                           COMPANY

                                           Name:
                                                --------------------------------

                                           Date:
                                                --------------------------------


                                       2.
<PAGE>
                                                               Group Termination


                                    EXHIBIT B

                                RELEASE AGREEMENT

           Except as otherwise set forth in this Release Agreement or in
Sections 7 and 18 of the Amended and Restated Employment Agreement between
George E. Bull, III and Redwood Trust, Inc., George E. Bull, III ("Executive")
hereby generally and completely releases the Company and its directors,
officers, employees, shareholders, partners, agents, attorneys, predecessors,
successors, parent and subsidiary entities, insurers, affiliates, and assigns
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring at any time prior to and including the date Executive signs
this Release Agreement. The Company, its directors, officers, employees,
shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, affiliates, and assigns, hereby releases
Executive and his heirs, executors, successors and assigns, from any and all
claims, liabilities and obligations, both known and unknown, that arise out of
or are in any way related to events, acts, conduct, or omissions occurring at
any time prior to and including the date the Company signs this Release
Agreement. This general mutual release includes, but is not limited to: (A) all
claims arising out of or in any way related to Executive's employment with the
Company or the termination of that employment; (B) all claims related to
Executive's compensation or benefits from the Company, including salary,
bonuses, commissions, vacation pay, expense reimbursements, severance pay,
fringe benefits, stock, stock options, or any other ownership interests in the
Company; (C) all claims for breach of contract, wrongful termination, and breach
of the implied covenant of good faith and fair dealing; (D) all tort claims,
including claims for fraud, defamation, emotional distress, and discharge in
violation of public policy; and (E) all federal, state, and local statutory
claims, including claims for discrimination, harassment, retaliation, attorneys'
fees, or other claims arising under the federal Civil Rights Act of 1964 (as
amended), the federal Americans with Disabilities Act of 1990, the federal Age
Discrimination in Employment Act of 1967 (as amended) ("ADEA"), the federal
Employee Retirement Income Security Act of 1974 (as amended), and the California
Fair Employment and Housing Act (as amended); provided, however, that nothing in
this paragraph shall be construed in any way to release the Company from its
obligation to indemnify Executive pursuant to agreement, the Company's bylaws or
binding resolutions, or applicable law.

           Executive acknowledges that he is knowingly and voluntarily waiving
and releasing any rights he may have under the ADEA, and that the consideration
given under his Employment Agreement with the Company for the waiver and release
in the preceding paragraph hereof is in addition to anything of value to which
he was already entitled. Executive further acknowledges that he has been advised
by this writing, as required by the ADEA, that: (A) this waiver and release does
not apply to any rights or claims that may arise after the date Executive signs
this Release Agreement; (B) Executive should consult with an attorney prior to
signing this Release Agreement (although Executive may choose voluntarily not do
so); (C) Executive has forty-five (45) days to consider this Release Agreement
(although he may choose voluntarily to sign this Release Agreement earlier); (D)
Executive has seven (7) days following the date that he signs this Release
Agreement to revoke the Release Agreement by providing written notice to an
officer of the Company; (E) this Release Agreement shall not be effective until
the date upon


                                       1.
<PAGE>
                                                               Group Termination


which the revocation period has expired, which shall be the eighth day after
Executive signs this Release Agreement; and (F) Executive has received with this
Release Agreement a detailed list of the job titles and ages of all employees
who were terminated in this group termination and the ages of all employees of
the Company in the same job classification or organizational unit who were not
terminated.

           Both the Executive and the Company acknowledge that each has read and
understands Section 1542 of the California Civil Code which reads as follows: "A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Both
the Executive and the Company hereby expressly waive and relinquish all rights
and benefits under that section and any law of any jurisdiction of similar
effect with respect to each party's release of any claims hereunder.



                                           EXECUTIVE

                                           Name:
                                                --------------------------------

                                           Date:
                                                --------------------------------



                                           COMPANY

                                           Name:
                                                --------------------------------

                                           Date:
                                                --------------------------------


                                       2.

</TEXT>
</DOCUMENT>
