DEF 14A 1 a2021proxy.htm DEF 14A Document









UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant:ý
Filed by a Party other than the Registrant:o
Check the appropriate box:
oPreliminary Proxy Statement
oConfidential, for Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))
xDefinitive Proxy Statement
oDefinitive Additional Materials
oSoliciting Material Pursuant to §240.14a-12
REDWOOD TRUST, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
ýNo fee required.
oFee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)Title of each class of securities to which transaction applies:
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oFee paid previously with preliminary materials.
oCheck box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
(1)Amount Previously Paid:
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REDWOOD TRUST, INC.
One Belvedere Place, Suite 300
Mill Valley, California 94941
(415) 389-7373

NOTICE OF 2021 ANNUAL MEETING OF STOCKHOLDERS

To the Stockholders of Redwood Trust, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of Redwood Trust, Inc., a Maryland corporation, to be held on May 20, 2021 at 8:30 a.m., Pacific time, virtually via the Internet at www.meetingcenter.io/238898041, as an alternative to an in-person meeting, for the following purposes:
1.To elect Richard D. Baum, Greg H. Kubicek, Christopher J. Abate, Armando Falcon, Douglas B. Hansen, Debora D. Horvath, George W. Madison, Jeffrey T. Pero, Georganne C. Proctor, and Faith A. Schwartz to serve as directors until the Annual Meeting of Stockholders in 2022 and until their successors are duly elected and qualify;
2.To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2021;
3.To vote on a non-binding advisory resolution to approve named executive officer compensation;
4.To vote on an amendment to our 2002 Employee Stock Purchase Plan to increase the number of shares available for purchase; and
5.To transact such other business as may properly come before the Annual Meeting or any adjournment or postponement of the Annual Meeting.
We have elected to use the Internet as our primary means of providing our proxy materials to stockholders. Consequently, stockholders will not receive paper copies of our proxy materials unless they specifically request them. We will send a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about April 10, 2021 to our stockholders of record as of the close of business on March 24, 2021. We are also providing access to our proxy materials over the Internet beginning on April 10, 2021. Electronic delivery of our proxy materials will reduce printing and mailing costs relating to our Annual Meeting.
The Notice contains instructions for accessing the proxy materials, including the Proxy Statement and our annual report, and provides information on how stockholders may obtain paper copies free of charge. The Notice also provides the date and time of the Annual Meeting; the matters to be acted upon at the Annual Meeting and the Board’s recommendation with regard to each matter to be acted upon; and information on how to attend the Annual Meeting and vote online.
Our Board of Directors has fixed the close of business on March 24, 2021 as the record date for determination of stockholders entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement of the Annual Meeting.

To participate in the virtual Annual Meeting, stockholders of record (or “registered stockholders”) will need the control number included on your Notice, your proxy card, or on the instructions that accompanied your proxy materials, and the meeting password: rwt2021

If your stock is held through a broker, bank or other nominee (commonly referred to as being held “in street name”), you are a “beneficial stockholder” and your broker, bank or other nominee is considered the “stockholder of record” of those shares. In such case, you have the right to direct your broker, bank or other nominee how to vote your shares and will receive in the mail (or electronically, if you so elected) a voting instruction form with a control number from such broker, bank or other nominee. Beneficial stockholders can attend the virtual Annual Meeting in two ways:

Pre-Registration with Legal Proxy. Beneficial stockholders may attend and vote at the virtual meeting by following the same standard pre-registration process that would have applied to an in-person meeting. To pre-register, send an email to legalproxy@computershare.com before 5:00 p.m. Pacific Time on May 13, 2021 and include your mailing address and an image of a legal proxy in your name from the broker, bank or other nominee that holds your shares. In order to obtain a legal proxy, you should, as soon as possible: (1) log into the voting site listed on the voting instruction form you received from your broker, bank or other nominee and click on “Vote in person at the meeting” or (2) request one through your bank, broker or other nominee. After you transmit the legal proxy to the foregoing email address, you will receive a control number from Computershare, our virtual meeting provider, to access the virtual meeting website as a “stockholder.”

Note that once you request a legal proxy, all control numbers you previously received from your broker (as described in the next paragraph) and any votes that you have previously cast will be invalidated. Thus, in order to vote your shares, you would need to attend the Annual Meeting with the new control number from Computershare and vote your shares during the Annual Meeting.

Direct Access with Broker Control Number. Many beneficial stockholders may access the virtual meeting website as a “stockholder” using the control number directly provided by their broker, bank or other nominee on their voting instruction form, without the need for pre-registration with a legal proxy. If your shares are held in street name and your voting instruction form or notice indicates that you may vote those shares through either www.proxyvote.com or www.proxypush.com, then you may access, participate in and vote at the Annual Meeting by entering into the log-in page of the virtual meeting website the control number provided on your voting instruction form and the password: rwt2021

If your voting instruction form or notice directs you to a voting platform other than the two websites noted above, then it means that your broker, bank or other nominee is not a participant in this new service and therefore, you must follow the “Pre-Registration with Legal Proxy” process in order to participate in the virtual Annual Meeting as a “stockholder.”

We would like your shares to be represented at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we respectfully request that you authorize your proxy over the Internet following the voting procedures described in the Notice. In addition, if you have requested or received a paper or email copy of the proxy materials, you can authorize your proxy over the telephone or by signing, dating and returning the proxy card sent to you. We encourage you to authorize your proxy by any of these methods even if you currently plan to attend the Annual Meeting. By doing so, you will ensure that your shares are represented and voted at the Annual Meeting.

By Order of the Board of Directors,
/s/ Andrew P. Stone
Secretary
March 31, 2021
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY AUTHORIZE A PROXY TO CAST YOUR VOTES THROUGH THE INTERNET FOLLOWING THE VOTING PROCEDURES DESCRIBED IN THE NOTICE OR, IF YOU HAVE REQUESTED AND RECEIVED PAPER COPIES OF THE PROXY MATERIALS, BY TELEPHONE OR BY SIGNING, DATING AND RETURNING THE PROXY CARD SENT TO YOU.











TABLE OF CONTENTS
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REDWOOD TRUST, INC.
One Belvedere Place, Suite 300
Mill Valley, California 94941
(415) 389-7373


PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2021 



INTRODUCTION

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Redwood Trust, Inc., a Maryland corporation (“Redwood,” the “Company,” “we,” or “us”), for exercise at the “virtual” Annual Meeting of Stockholders (the “Annual Meeting”) to be held on May 20, 2021 at 8:30 a.m., Pacific time, via the Internet, and at any adjournment or postponement thereof.

We have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) to our stockholders of record, while brokers and other nominees who hold shares on behalf of beneficial owners will be sending their own similar notice of internet availability of proxy materials. All stockholders will have the ability to access proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to request a printed copy by mail or electronically may be found on the Notice and on the website referred to in the Notice, including an option to request paper copies on an ongoing basis. We intend to make this Proxy Statement available on the Internet on or about April 10, 2021 and to mail the Notice to all stockholders entitled to vote at the Annual Meeting on or about April 10, 2021. We intend to mail this Proxy Statement, together with a proxy card, to those stockholders entitled to vote at the Annual Meeting who have properly requested paper copies of such materials on or about April 10, 2021 or within three business days of such request.

The address and telephone number of our principal executive office are as set forth above and our website is www.redwoodtrust.com. Information on our website is not a part of this Proxy Statement.




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INFORMATION ABOUT THE ANNUAL MEETING

Who May Attend the Annual Meeting

Only stockholders who own our common stock as of the close of business on March 24, 2021, the record date for the Annual Meeting, will be entitled to attend the Annual Meeting. In the discretion of management, we may permit certain other individuals to attend the Annual Meeting, including members of the media and our employees.

Who May Vote

Each share of our common stock outstanding on the record date for the Annual Meeting entitles the holder thereof to one vote. The record date for determining stockholders entitled to notice of, and to vote at, the Annual Meeting is the close of business on March 24, 2021. As of March 24, 2021, there were 112,983,272 shares of common stock issued and outstanding. You can attend and vote at the virtual Annual Meeting or vote by authorizing a proxy. You may authorize your proxy through the Internet by following the voting procedures described in the Notice or, if you have requested and received paper copies of the proxy materials, by telephone or by signing, dating, and returning the proxy card sent to you. To use a particular voting procedure, follow the instructions on the Notice or the proxy card that you request and receive by mail or email.

If your shares are held in the name of a bank, broker, or other holder of record, you will receive instructions from the holder of record that you must follow in order for your shares to be voted. If your shares are not registered in your own name and you plan to cast your votes at the virtual Annual Meeting, you should contact your broker or agent to obtain a broker’s proxy card in order to vote at the virtual Annual Meeting.


Voting by Proxy; Board of Directors’ Voting Recommendations

You may authorize your proxy over the Internet or, if you request and receive a proxy card by mail or email, over the phone or by signing, dating and returning the proxy card sent to you. If you vote by proxy, the individuals named on the proxy, or their substitutes, will cast your votes in the manner you indicate. If you date, sign, and return a proxy card without marking your voting instructions, your votes will be cast in accordance with the recommendations of Redwood’s Board of Directors, as follows:
For the election of each of the 10 nominees to serve as directors until the Annual Meeting of Stockholders in 2022 and until their successors are duly elected and qualify;
For the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2021;
For the approval of the non-binding advisory resolution approving the compensation of our named executive officers;
For the approval of the amendment to our 2002 Employee Stock Purchase Plan to increase the number of shares available for purchase thereunder; and
In the discretion of the proxy holder on any other matter that properly comes before the Annual Meeting.
You may revoke or change your proxy at any time before it is exercised by submitting a new proxy through the Internet or by telephone, delivering to us a signed proxy with a date later than your previously delivered proxy, by attending and voting at the Annual Meeting, or by sending a written revocation of your proxy addressed to Redwood’s Secretary at our principal executive office.

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Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

Under rules adopted by the Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy materials over the Internet. Accordingly, we are sending the Notice to our stockholders. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. We encourage stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce printing and mailing costs relating to our Annual Meeting.

Quorum Requirement

The presence, by attendance at the virtual Annual Meeting or by proxy, of stockholders entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes are counted as present for purposes of establishing a quorum. A broker non-vote occurs when a nominee holding shares for a beneficial owner has not received instructions from the beneficial owner and does not have discretionary authority to vote the shares.

Other Matters

Our Board of Directors knows of no other matters that may be presented for stockholder action at the Annual Meeting. If other matters properly come before the Annual Meeting, however, it is intended that the persons named in the proxies will vote on those matters in their discretion.

Information About the Proxy Statement and the Solicitation of Proxies

Your proxy is solicited by our Board of Directors and we will bear the costs of this solicitation. Proxy solicitations will be made by mail, and also may be made by our directors, officers, and employees in person or by telephone, facsimile transmission, e-mail, or other means of communication. Banks, brokerage houses, nominees, and other fiduciaries will be requested to forward the proxy soliciting material to the beneficial owners of shares of our common stock entitled to be voted at the Annual Meeting and to obtain authorization for the execution of proxies on behalf of beneficial owners. We will, upon request, reimburse those parties for their reasonable expenses in forwarding proxy materials to their beneficial owners.

In addition, we have retained MacKenzie Partners, Inc., 1407 Broadway, 27th Floor, New York, NY 10018, to aid in the solicitation of proxies by mail, telephone, facsimile, e-mail and personal solicitation and to contact brokerage houses and other nominees, fiduciaries and custodians to request that such entities forward soliciting materials to beneficial owners of our common stock. For these services, we will pay MacKenzie Partners, Inc. a fee not expected to exceed $15,000, plus expenses.

Annual Report

Our 2020 Annual Report, consisting of our Annual Report on Form 10-K for the year ended December 31, 2020, is being made available to stockholders together with this Proxy Statement and contains financial and other information about Redwood, including audited financial statements for our fiscal year ended December 31, 2020. Certain sections of our 2020 Annual Report are incorporated into this Proxy Statement by reference, as described in more detail under “Information Incorporated by Reference” at the end of this Proxy Statement. Our 2020 Annual Report is also available on our website.

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Householding

We have adopted a procedure approved by the SEC called “householding.” Under this procedure, stockholders of record who have the same address and last name will receive only one copy of the Notice, unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure reduces our printing and mailing costs.

Householding will not in any way affect dividend check mailings.

If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of the Notice, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of this document for your household, please contact our transfer agent, Computershare Trust Company, N.A., either in writing at: Computershare Investor Services, 250 Royall Street, Canton, MA 02021; or by telephone at: (888) 472-1955.

If you participate in householding and wish to receive a separate copy of the Notice, or if you do not wish to participate in householding and prefer to receive separate copies of this document in the future, please contact Computershare as indicated above.

Beneficial owners can request information about householding from their banks, brokers, or other holders of record.

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CORPORATE GOVERNANCE

Corporate Governance Standards

Our Board of Directors has adopted Corporate Governance Standards (“Governance Standards”). Our Governance Standards are available on our website as well as in print at the written request of any stockholder addressed to Redwood’s Secretary at our principal executive office. The Governance Standards contain general principles regarding the composition and functions of our Board of Directors and its committees.

Process for Nominating Potential Director Candidates

Identifying and Evaluating Nominees for Directors.  Our Board of Directors nominates director candidates for election by stockholders at each annual meeting and elects new directors to fill vacancies on our Board of Directors between annual meetings of the stockholders. Our Board of Directors has delegated the selection and initial evaluation of potential director nominees to the Governance and Nominating Committee with input from the Chief Executive Officer and President. The Governance and Nominating Committee makes the final recommendation of candidates to our Board of Directors for nomination. Our Board of Directors, taking into consideration the assessment of the Governance and Nominating Committee, also determines whether a nominee would be an independent director.

Stockholders’ Nominees.  Our Bylaws permit stockholders to nominate a candidate for election as a director at an annual meeting of the stockholders subject to compliance with certain notice and informational requirements, as more fully described below in this Proxy Statement under “Stockholder Proposals for the 2022 Annual Meeting.” A copy of the full text of our current Bylaws may be obtained by any stockholder upon written request addressed to Redwood’s Secretary at our principal executive office. Among other matters required under our Bylaws, any stockholder nominations should include the nominee’s name and qualifications for Board membership and should be addressed to Redwood’s Secretary at our principal executive office.

The policy of the Governance and Nominating Committee is to consider properly submitted stockholder nominations for candidates for election to our Board of Directors. The Governance and Nominating Committee evaluates stockholder nominations in connection with its responsibilities set forth in its written charter and applies the qualification and diversity criteria set forth in the Governance Standards.

Director Qualifications.  Our Governance Standards contain Board membership criteria that apply to nominees for our Board of Directors. Each member of our Board of Directors must exhibit high standards of integrity, commitment, and independence of thought and judgment, and must be committed to promoting the best interests of Redwood. In addition, each director must devote the time and effort necessary to be a responsible and productive member of our Board of Directors. This includes developing knowledge about Redwood’s business operations and doing the work necessary to participate actively and effectively in Board and committee meetings.

Our Governance Standards also contain criteria that are intended to guide our Governance and Nominating Committee’s considerations of diversity in identifying nominees for our Board of Directors. In particular, our Governance Standards provide that the members of our Board of Directors should collectively possess a broad range of talent, skill, expertise, background, and life experience useful to effective oversight of our business and affairs and sufficient to provide sound and prudent guidance with respect to our operations and interests. Our Board of Directors considers diversity as broadly construed to mean a variety of identities, perspectives, personal and professional experiences and backgrounds. This can be represented in characteristics that include but are not limited to race, ethnicity, national origin, gender and sexual orientation. The self-assessments that are conducted each year by our Board of Directors and our Governance and Nominating Committee include an assessment of whether the Board’s then current composition represents the broad range of talent, skill, expertise, background, and life experience that is called for by our Governance Standards.

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Among our 10 nominees for election to the Board, three nominees are women and another two nominees self-identify as individuals from an underrepresented community. For this purpose, an “individual from an underrepresented community” means an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender. This use of the term “individual from an underrepresented community” is consistent with the use of that term in California Assembly Bill 979.
A profile of the gender, racial and ethnic diversity of Redwood's current Board of Directors is illustrated below:
board_diversity0021a.jpg
We believe our directors have a well-rounded variety of diversity, skills, qualifications and experience, and represent an effective mix of deep company knowledge and outside perspectives. Additional information regarding the mix of experience, qualifications, attributes and skills of our directors is included under Item 1 Election of Directors on pages 13-23 of this Proxy Statement.

Director Independence

As required under Section 303A of the New York Stock Exchange (“NYSE”) Listed Company Manual and our Governance Standards: on February 24, 2021 our Board of Directors affirmatively determined that none of the following directors have a material relationship (either directly or as a partner, shareholder, or officer of an organization that has a relationship) with us and that each of them qualifies as “independent” under Section 303A: Richard D. Baum, Greg H. Kubicek, Douglas B. Hansen, Debora D. Horvath, George W. Madison, Jeffrey T. Pero, and Georganne C. Proctor; and on March 29, 2021 our Board of Directors affirmatively determined that neither Armando Falcon nor Faith A. Schwartz have a material relationship (either directly or as a partner, shareholder, or officer of an organization that has a relationship) with us and that each of them qualifies as “independent” under Section 303A. The Board of Directors’ determinations were made after consideration of, among other things, the relationships and related party transactions described below under “Additional Information About Directors and Executive Officers — Certain Relationships and Related Party Transactions” on page 87 of this Proxy Statement. One member of our Board of Directors, Mr. Abate, does not qualify as “independent” under Section 303A of the NYSE Listed Company Manual or our Governance Standards because he is Redwood's Chief Executive Officer.

Board Leadership Structure

At Redwood, there is a separation of the chairman and chief executive officer roles. The Chairman of the Board of Directors presides over meetings of the Board and serves as a liaison between the Board and management of Redwood. In addition, the Chairman provides input regarding Board agendas, materials, and areas of focus, and may represent Redwood to external constituencies such as investors, governmental representatives, and business counterparties. The Chairman is currently Richard D. Baum, who was elected Chairman in September 2012 and who has served as an independent director of Redwood since 2001.
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In December 2020, the Board of Directors elected Greg H. Kubicek, an independent director, to serve as Vice Chairman of the Board. The Vice Chairman presides over meetings of the Board in the absence of the Chairman and acts as a resource to management by providing strategic counsel and advice. Mr. Kubicek has served as an independent director of Redwood since 2002.

In addition, under the Governance Standards, each of the Audit Committee, Compensation Committee, and Governance and Nominating Committee of Redwood’s Board of Directors is comprised solely of independent directors.

The Board believes this leadership structure is appropriate for Redwood, as it provides for the Board to be led by, and its standing committees to be comprised of, independent directors. As an independent Chairman of the Board, Mr. Baum brings nearly two decades of experience of serving on Redwood’s Board along with the important perspective of an independent director to this leadership position.

Executive Sessions

Our Governance Standards require that our non-employee directors (i.e., the nine of our ten current directors who are not Redwood employees) meet in executive session at each regularly scheduled quarterly meeting of our Board of Directors and at such other times as determined by our Chairman. In addition, if any non-employee director is not also an independent director, then our Governance Standards require that our independent directors meet at least annually in executive session without any such non-independent directors.

Board of Directors’ Role in Risk Oversight

The Board of Directors takes a primary role in risk oversight. At its regular meetings, the Board of Directors reviews Redwood’s business and investment strategies and plans and seeks an understanding of the related risks as well as management’s approach to identifying and managing those risks. In carrying out its role in risk oversight, the Board of Directors receives and discusses quarterly reports from the Chief Executive Officer and Audit Committee, which also carries out a risk oversight function delegated by the Board of Directors.

Under its charter, the Audit Committee is specifically charged with (i) inquiring of management and Redwood’s independent registered public accounting firm about significant risks or exposures with respect to corporate accounting, reporting practices of Redwood, the quality and integrity of the financial reports and controls of Redwood, regulatory and accounting initiatives, and any off-balance sheet structures and (ii) assessing the steps management has taken to minimize such risks. In addition, the Audit Committee is specifically charged with regularly discussing with management Redwood’s policies with respect to risk assessment and risk management, including identification of Redwood’s major financial and operational risk exposures and the steps management has taken to monitor or control those exposures. For example, the Audit Committee receives quarterly reports from management regarding various financial risk management topics (such as interest rate risk, liquidity risk, and counterparty risk), and various operational risk management topics (such as cybersecurity, operations and regulatory compliance) and regularly discusses with management Redwood's exposure to, and management of, financial and operational risks.

The Audit Committee carries out this function by, among other things, receiving a quarterly risk management report from Redwood’s Chief Executive Officer and other Redwood officers, and a quarterly internal audit report from Redwood’s head of internal audit, reviewing these reports, and discussing them by asking questions and providing direction to management. In addition, as noted below under “Audit Committee Matters — Audit Committee Report,” the Audit Committee also receives and discusses regular and required communications from Redwood’s independent registered public accounting firm regarding, among other things, Redwood’s internal controls. In addition to discussion of these reports during Audit Committee meetings, as circumstances merit, the Audit Committee holds separate executive sessions with one or more of the Chief Executive Officer, Redwood’s head of internal audit, and representatives of Redwood’s independent registered public accounting firm to discuss
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any matters that the Audit Committee or these persons believe should be discussed in the absence of other members of management. Redwood's head of internal audit and the Chair of the Audit Committee also regularly communicate between Audit Committee meetings.

In addition, when appropriate, the Board of Directors may delegate to the Compensation Committee and Governance and Nominating Committee risk oversight responsibilities with respect to certain matters or request that other committees review certain risk oversight matters. For example, the Compensation Committee has been delegated the responsibility for determining, on an annual basis, whether Redwood’s compensation policies and practices are reasonably likely to have a material adverse effect on Redwood. As another example, the Governance and Nominating Committee reports to the Board of Directors the results of its analysis of potential risks related to board leadership and composition, board structure, and executive succession planning.

The Board of Directors believes that this manner of administering the risk oversight function effectively integrates oversight into the Board of Directors’ leadership structure, because the risk oversight function is carried out both at the Board level as well as through delegation to the Audit Committee, which consists solely of independent directors, and when appropriate to the Compensation Committee and Governance and Nominating Committee, which also consist solely of independent directors.

Corporate Responsibility

Corporate responsibility and sustainability are foundational to Redwood’s ability to grow and deliver attractive risk-adjusted returns to stockholders over the long term. The sustainability of Redwood’s business depends on a broad array of factors, including a continuing focus on investments in our people, ethics and integrity, and corporate responsibility. Strong corporate governance, coupled with sound financial and operational risk management, are also essential pillars that support Redwood’s growth and sustainability. Redwood’s leaders and managers collaborate to develop and maintain corporate responsibility and sustainability initiatives, and metrics that measure their impact, and provide regular updates to Redwood’s Board of Directors and its standing committees. Additional information about Redwood’s corporate responsibility and sustainability programs and initiatives may be provided from time to time on Redwood’s corporate website at www.redwoodtrust.com.

Board of Directors' Role in ESG Oversight

Redwood’s management, under the oversight of the Board of Directors, formulates Redwood’s strategic and operational approach to environmental, social, and governance (“ESG”) matters and executes on specific ESG initiatives. The Board of Directors’ oversight of management’s approach to ESG matters is structured as follows, with the Board’s standing Committees playing primary roles and regularly providing reports to the full Board:
Environmental Matters. As part of its oversight of financial risk, the Audit Committee reviews updates from management regarding environmental-related risk management and initiatives, including climate change-related risk.
Social Matters. The Compensation Committee reviews updates from management regarding risk and opportunity related to social matters, including, among other things, human capital-related matters such as workforce inclusion and diversity initiatives and employee engagement efforts.
Governance Matters. The Governance and Nominating Committee is responsible for overseeing corporate governance matters at Redwood, including, among other things, Board structure, Board composition and succession planning, the Board's self-evaluation process, and the receipt, retention, and treatment of reported concerns related to potential violations of Redwood's Code of Ethics.





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Board of Directors’ Self-Evaluation Process

The Board believes it is important to periodically assess its own performance and effectiveness in carrying out its strategic and oversight role with respect to the Company. The Board evaluates its performance through annual self-assessments at the Board and Committee levels, as well as through annual individual director self-assessments that include one-on-one meetings conducted by the Chairman with each of the other directors (or, with respect to the Chairman, the Chair of the Governance and Nominating Committee). These self-assessments include analysis of the effectiveness of the Board, its Committees and its directors, how they are functioning and areas of potential improvement. The results of these performance reviews are also considered, among other things, by the Governance and Nominating Committee and the Board when considering whether to recommend a director for re-election and whether to consider new director candidates.

Board Tenure and Refreshment; Mandatory Retirement Age

Consistent with our Governance Standards, the Board is mindful that the composition of the Board, from a tenure and refreshment perspective, should reflect an appropriate mix of individuals with significant experience as a member of Redwood’s Board, together with individuals who are newer to service on Redwood’s Board, who bring fresh perspectives and additional diversity of thought. For example, given Redwood’s business model, which includes investing in long-term mortgage obligations and regularly accessing the mortgage finance markets, directors who have served on Redwood’s Board through multiple economic and financial market cycles are valued for the continuity and long-term perspectives they provide to other Board members and to management. At the same time, the business environment in which Redwood operates is constantly evolving – including from human capital and technological perspectives – and, therefore, Board refreshment is important to the continued effectiveness of the Board in the oversight of these and other evolving matters of importance to Redwood.
At Redwood, refreshment of the composition of Redwood’s Board regularly occurs, for a variety of reasons, including the following:
Director Retirement / Departure. Director departures and retirements, including in accordance with the mandatory retirement age set forth in our Governance Standards, prompt refreshment.
Mandatory Retirement Age. Under our Governance Standards, an individual, including an incumbent director, is ineligible to stand for election or re-election to the Board after reaching age 75.
Board Expansion. Redwood is permitted under its Charter to increase the size of the Board of Directors; expanding the size of the Board when merited will enable Redwood to add new Board members to address emerging needs for Board-level expertise.
Board’s Succession Planning / Self-Evaluation Process. The Board’s collective and individual self-assessment process (described further above under the heading “Board of Directors’ Self-Evaluation Process”) provides perspectives on Board composition that can prompt refreshment. In addition, Board refreshment will result from the Board’s ongoing succession planning efforts to attract new directors to replace directors who are expected to retire or otherwise depart from the Board.







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boardrefreshment1a.jpg

Communications with the Board of Directors

Stockholders and other interested parties may communicate with our Board of Directors by e-mail addressed to boardofdirectors@redwoodtrust.com. The Chairman has access to this e-mail address and provides access to other directors as appropriate. Communications that are intended specifically for non-employee directors should be addressed to the Chairman.

Director Attendance at Annual Meetings of Stockholders

Pursuant to our Governance Standards, Redwood's directors are expected to attend annual meetings of stockholders in person or telephonically. All of Redwood's directors attended last year’s annual meeting of stockholders, which was conducted solely as a “virtual” meeting, via a live webcast. We currently expect all directors nominated for election to attend telephonically or via webcast at this year's Annual Meeting.

Code of Ethics

The Board of Directors has adopted a Code of Ethics that applies to all of Redwood's directors, officers, and employees. The Code of Ethics is available on our website as well as in print at the written request of any stockholder addressed to Redwood’s Secretary at our principal executive office.

We intend to post on our website and disclose in a Current Report on Form 8-K, to the extent required by applicable regulations, any change to the provisions of Redwood's Code of Ethics and any waiver of a provision of the Code of Ethics.

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STOCK OWNERSHIP REQUIREMENTS

Required Stock Ownership by Directors

Pursuant to our Governance Standards, non-employee directors are required to purchase from their own funds at least $50,000 of our common stock within three years from the date of commencement of their Board membership. Vested deferred stock units (“DSUs”) acquired by a director under our Executive Deferred Compensation Plan through the voluntary deferral of cash compensation that otherwise would have been paid to that director are counted towards this requirement. Any director whose status has changed from being an employee director to being a non-employee director is not subject to this requirement if that director held at least $50,000 of our common stock at the time of that change in status.

Additionally, non-employee directors are required to own at least $425,000 of our common stock, including vested DSUs acquired through both voluntary and involuntary deferred compensation, within five years from the date of commencement of their Board membership. Stock and DSUs acquired with respect to the $50,000 stock purchase requirement count toward the attainment of this additional stock ownership requirement. Compliance with the ownership requirements is measured on a purchase/acquisition cost basis.

As of the date of this Proxy Statement, all of our non-employee directors were in compliance with these requirements either due to ownership of the requisite number of shares or because the director was within the time period permitted to attain the required level of ownership.

Required Stock Ownership by Executive Officers

The Compensation Committee of our Board of Directors has set the following executive stock ownership requirements with respect to our executive officers:
Each executive officer is required to own stock with a value at least equal to (i) six times current salary for the Chief Executive Officer, (ii) three times current salary for the President, and (iii) two times current salary for the other executive officers;
Three years are allowed to initially attain the required level of ownership and three years are allowed to acquire additional incremental shares if promoted to a position with a higher requirement or when a salary increase results in a higher requirement (if not in compliance at the indicated times, then the executive officer is required to retain net after-tax shares delivered as compensation or from the Executive Deferred Compensation Plan until compliance is achieved);
All shares owned outright are counted, including those held in trust for the executive officer and his or her immediate family, as well as vested DSUs and any other vested shares held pursuant to other employee plans; and
Compliance with these requirements is measured on a purchase/acquisition cost basis, and includes DSUs acquired through both voluntary and involuntary deferred compensation.
As of the date of this Proxy Statement, all of Redwood’s executive officers were in compliance with these requirements either due to ownership of the requisite number of shares or because he or she was within the time period permitted to attain the required level of ownership. The chart on the following page illustrates the stock ownership level relative to the applicable requirement for each of our executive officers.








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stockownershipguidelines11a.jpg

Stock ownership in the chart above is calculated on a purchase/acquisition price cost basis in accordance with Executive Stock Ownership Requirements as of March 24, 2021. Mr. Abate, Mr. Robinson and Ms. Macomber are within the time period permitted to attain the increased level of ownership required for their executive officer roles, respectively. Initial ownership levels must be attained by May 2021 for Mr. Abate and Mr. Robinson and by December 2021 for Ms. Macomber. Incremental ownership levels due to the base salary increases made by the Compensation Committee in December 2019 for 2020, and in December 2020 for 2021, must be attained by January 2023 and January 2024, respectively.
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ITEM 1 — ELECTION OF DIRECTORS

The nominees for the 10 director positions are set forth below. In the event we are advised prior to the Annual Meeting that any nominee will be unable to serve or for good cause will not serve as a director if elected at the Annual Meeting, the proxies will cast votes for any person who shall be nominated by the present Board of Directors to fill such directorship. On December 1, 2020, Fred J. Matera, who had served as a director since March 2019, was formally appointed to serve in an ongoing role as an officer of Redwood, and resigned from Redwood’s Board of Directors. Following Mr. Matera’s resignation from the Board of Directors, the number of directors constituting the Board of Directors was reduced from nine to eight. Subsequently, on March 30, 2021, the number of directors constituting the Board of Directors was increased from eight to 10, and Armando Falcon and Faith A. Schwartz were elected to join the Board of Directors. The nominees listed below currently are serving as directors of Redwood.

Vote Required

If a quorum is present, the election of each nominee as a director requires a majority of the votes cast with respect to such nominee at the Annual Meeting. For purposes of the election of directors, a majority of the votes cast means that the number of votes cast “for” a nominee for election as a director exceeds the number of votes cast “against” that nominee. Cumulative voting in the election of directors is not permitted. Abstentions and broker non-votes will not be counted as votes cast and will have no effect on the results of the vote in the election of directors. In accordance with Redwood’s Bylaws and its Policy Regarding Majority Voting, any incumbent nominee for director must offer to resign from the Board if he or she fails to receive the required number of votes for re-election.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE NOMINEES IDENTIFIED BELOW.

Nominees to Board of Directors
Name Position with Redwood
Richard D. Baum Chairman of the Board
Greg H. KubicekVice Chairman of the Board
Christopher J. AbateDirector and Chief Executive Officer
Armando FalconDirector
Douglas B. Hansen Director
Debora D. Horvath Director
George W. MadisonDirector
Jeffrey T. Pero Director
Georganne C. Proctor Director
Faith A. SchwartzDirector

Set forth on the following pages is a summary of the experience, qualifications, attributes and skills of each of the nominees for election at the Annual Meeting, as well as certain biographical information regarding each of these individuals.

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Summary of Director Nominees’ Experience, Qualifications, Attributes and Skills
Director Nominees
BaumKubicekAbateFalconHansenHorvathMadisonPeroProctorSchwartz
Leadership üüüüüüüüüü
Real Estate Industry üüüüüü  ü
Accounting/ Finance  üüüü  ü
Insurance Industryü    üü  ü
Governmentüüü  
Capital Markets  üüüüüü
Corporate / Institutional
Governance
üü  üüüü  
Banking / Investment
Management
      üüü  üü
Technology      ü    ü

For each nominee for election as a director, set forth below and on the following pages is biographical information regarding the nominee, as well as factors supporting the Board of Directors' conclusion to nominate the nominee for election to continue to serve as a director.

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Richard D. Baum, age 74, is Chairman of the Board and has been a director of Redwood since 2001. Between 2001 and 2020, Mr. Baum served as President and Managing Partner of Atwater Retirement Village LLC (a private company). From 2008 to mid-2009, Mr. Baum served as Executive Director of the California Commission for Economic Development. He also served as the Chief Deputy Insurance Commissioner for the State of California from 1991 to 1994 and 2003
to 2007. Mr. Baum served from 1996 to 2003 as the President and CEO of Care West Insurance Company, and, prior to 1991, as Senior Vice President of Amfac, Inc., a diversified operating company engaged in various businesses, including real estate development and property management. Mr. Baum holds a B.A. from Stanford University, an M.A. from the State University of New York, and a J.D. from George Washington University, National Law Center.
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The Board of Directors concluded that Mr. Baum should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience
Experience as a chief executive officer
Experience in government service and financial regulation
Expertise and experience relating to the insurance industry
Expertise and experience relating to the real estate development industry and property management business
Expertise and experience relating to institutional governance
Professional and educational background    

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Greg H. Kubicek, age 64, has been a director of Redwood since 2002 and Vice Chairman of the Redwood Board of Directors since December 2020. Mr. Kubicek is President of The Holt Group, Inc., a real estate company and associated funds that purchase, develop, own, and manage real estate properties. Mr. Kubicek has also served as Chairman of the Board of Cascade Corporation, an international manufacturing corporation. Mr. Kubicek holds a B.A. in Economics from Harvard
College.
The Board of Directors concluded that Mr. Kubicek should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes
Management and entrepreneurial experience
Expertise and experience in the real estate development industry
Experience and expertise in the property management business
Professional and educational background

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Christopher J. Abate, age 41, has served as Chief Executive Officer of Redwood since May 2018 and as a director of Redwood since December 2017. Mr. Abate has been employed with Redwood since April 2006, previously serving as Redwood’s President from July 2016 to May 2018, Chief Financial Officer from March 2012 to August 2017, and Controller from January 2009 to March 2013. Mr. Abate is currently Chairman of the Board of the Structured Finance Association. Before
joining Redwood, Mr. Abate was employed by PricewaterhouseCoopers LLP. He holds a B.A. in Accounting and Finance from Western Michigan University, and an M.B.A. from the University of California at Berkeley and Columbia University.
The Board of Directors concluded that Mr. Abate should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience, including experience as President, Chief Financial Officer, and Controller of Redwood
Skill and experience in managing balance sheet exposures and managing risks
Skill and experience in executing capital markets transactions
Finance and accounting expertise and experience
Professional and educational background

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Armando Falcon, age 60, has been a director of Redwood since March 2021. Mr. Falcon is CEO of Falcon Capital Advisors LLC, a management consulting firm based in Washington, DC, that provides strategic advice and technical assistance to financial services companies, mortgage industry companies, and government agencies on matters involving process reengineering, project management, regulatory compliance, and data analytics, which he founded in 2007. He previously
served as the Director of the Office of Federal Housing Enterprise Oversight, and as the General Counsel for the Committee on Banking and Financial Services of the U.S. House of Representatives. Mr. Falcon currently serves on the Board of Directors of the American Stock Transfer and Trust Company and of the Structured Finance Association. Mr. Falcon also serves as an advisor to the Board of Directors of the National Association of Hispanic Real Estate Professionals. Mr. Falcon holds a B.A. from St. Mary’s University, an M.P.P. from Harvard University, and a J.D. from the University of Texas.
The Board of Directors concluded that Mr. Falcon should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience
Experience in government service and financial regulation
Expertise and experience in the real estate finance and financial services industries
Expertise and experience relating to corporate and institutional governance
Professional and educational background


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Douglas B. Hansen, age 63, is a founder of Redwood, and served as Redwood’s President from 1994 through 2008. Mr. Hansen retired from his position as President of Redwood at the end of 2008. Mr. Hansen has been a director of Redwood since 1994. Mr. Hansen serves on the Board of Directors of Four Corners Property Trust, Inc., a publicly traded real estate investment trust. Mr. Hansen also serves on the board of River of Knowledge, a not-for-profit institution. Mr. Hansen
holds a B.A. in Economics from Harvard College and an M.B.A. from Harvard Business School.
The Board of Directors concluded that Mr. Hansen should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience, including experience as President of Redwood Trust since its founding in 1994 through 2008
Skill and experience in investing in real estate-related assets and managing portfolios of such investments
Skill and experience in managing balance sheet exposures and managing risks
Skill and experience in executing capital markets transactions
Experience in finance and accounting matters
Professional and educational background
    





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Debora D. Horvath, age 66, has been a director of Redwood since 2016. Ms. Horvath is Principal of Horvath Consulting LLC, which she founded in 2010. From 2008 to 2010, Ms. Horvath served as an Executive Vice President for JP Morgan Chase & Co. Ms. Horvath served as an Executive Vice President and Chief Information Officer for Washington Mutual, Inc. from 2004 to 2008. Ms. Horvath, a 25-year veteran from General Electric Company (“GE”), served 12 years as a Senior
Vice President and Chief Information Officer for the GE insurance businesses. Ms. Horvath has been a Director of StanCorp Financial Group, Inc. since 2013. She was a director of the Federal Home Loan Bank of Seattle from 2012 to January 2014. Ms. Horvath holds a B.A. in Business Administration, with a major in Accounting, from Baldwin Wallace University.
The Board of Directors concluded that Ms. Horvath should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience
Experience as a chief information officer
Expertise and experience relating to information technology and technology risk management
Expertise and experience relating to institutional governance
Professional and educational background



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George W. Madison, age 67, has been a director of Redwood since July 2020. Mr. Madison is currently the sole member of Madison Governance Advisors LLC, a private corporate governance advisory business. Mr. Madison retired in March 2020, after serving as a partner at Sidley Austin LLP for six years, where he focused on financial institutions regulation and corporate governance issues on behalf of domestic and foreign financial firms and technology companies. Between April
2009 and June 2012, Mr. Madison served as the 30th General Counsel and chief law officer of the U.S. Department of the Treasury and as a senior policy advisor and senior counselor to Treasury Secretary Timothy F. Geithner. Prior to April 2009, Mr. Madison served as Executive Vice President and General Counsel of TIAA-CREF and Executive Vice President, General Counsel and Corporate Secretary at Comerica Incorporated. Before working at TIAA and Comerica, Mr. Madison was a partner at Mayer Brown, LLP, and was the first African-American partner in the then 120-year history of the firm. Earlier in his career, Mr. Madison was associated with the law firm of Shearman & Sterling LLP in New York and served as a law clerk to the Honorable Nathaniel R. Jones at the U.S. Court of Appeals for the Sixth Circuit in Cincinnati. Mr. Madison holds a B.S. from New York University's Stern School of Business, an M.B.A. from Columbia Business School, and a J.D. from Columbia Law School, where he was the 2011 keynote commencement speaker.
The Board of Directors concluded that Mr. Madison should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience
Experience in government service and financial regulation
Expertise and experience relating to corporate and institutional governance
Expertise and experience in the banking, insurance, and investment management industries
Professional and educational background



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Jeffrey T. Pero, age 74, has been a director of Redwood since November 2009. Mr. Pero retired in October 2009, after serving as a partner for more than 23 years, from the international law firm of Latham & Watkins LLP. At Latham & Watkins LLP, Mr. Pero’s practice focused on advising clients regarding corporate governance matters, debt and equity financings, mergers and acquisitions, and compliance with U.S. securities laws; Mr. Pero also served in various firm
management positions. Mr. Pero served on the Board of Directors of BRE Properties, Inc. from 2009 to 2014. Mr. Pero holds a B.A. from the University of Notre Dame and a J.D. from New York University School of Law.
The Board of Directors concluded that Mr. Pero should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Expertise and experience relating to corporate governance
Management experience
Expertise and experience relating to real estate investment trusts
Expertise and experience in structuring and negotiating debt and equity financings
Expertise and experience relating to the U.S. securities laws
Professional and educational background
    
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Georganne C. Proctor, age 64, has been a director of Redwood since March 2006. Ms. Proctor is the former Chief Financial Officer of TIAA-CREF, and served in that position from June 2006 to July 2010. Additionally, Ms. Proctor served jointly as Chief Financial Officer and Executive Vice President for Enterprise Integration at TIAA-CREF from January 2010 to July 2010. From July 2010 to October 2010, she continued to serve as Executive Vice President for Enterprise
Integration at TIAA-CREF. From 2003 to 2005, Ms. Proctor was Executive Vice President of Golden West Financial Corporation, a thrift institution. From 1994 to 1997, Ms. Proctor was Vice President of Bechtel Group, a global engineering firm, and also served as its Senior Vice President and Chief Financial Officer from 1997 to 2002 and as a director from 1999 to 2002. From 1991 to 1994, Ms. Proctor served as finance director of certain divisions of The Walt Disney Company, a diversified worldwide entertainment company. Ms. Proctor currently serves on the Board of Directors of Sculptor Capital Management, Inc. and Blucora, Inc., serving as Blucora’s Board Chair. Ms. Proctor previously served on the Board of Directors of Kaiser Aluminum Corporation from 2006 to 2009 and SunEdison, Inc. from 2013 to 2017.  Ms. Proctor holds a B.S. in Business Management from the University of South Dakota and an M.B.A. from California State University East Bay.
The Board of Directors concluded that Ms. Proctor should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Management experience
Experience as a chief financial officer
Expertise and experience in the banking, insurance, and investment management industries
Professional and educational background






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Faith A. Schwartz, age 60, has been a director of Redwood since March 2021. Ms. Schwartz is the President of Housing Finance Strategies, LLC, a professional services and advisory practice focusing on capital markets, rating agencies, and mortgage modernization and innovation, which she founded in 2016. Ms. Schwartz currently serves on the Board of Directors of Gateway First Bank, as well as on the boards of several other privately held mortgage industry-focused
companies, including FormFree Holdings Corporation and Class Valuation LLC. From 2013 to 2016, Ms. Schwartz served as Senior Vice President of Federal Practice of CoreLogic, Inc., a provider of property information, insight, analytics and data-enabled solutions. She is also the founder of HOPE NOW Alliance, a public-private initiative launched in 2007 to seek solutions for American families facing foreclosure during the Great Recession. Ms. Schwartz also previously served as Senior Vice President of Government, Housing, and Industry at Option One Mortgage Corporation, a subsidiary of H&R Block, from 2003 to 2007 and as Director of Alternative Markets and Director of National Sales at Freddie Mac between 1997 and 2003. From 2006 to 2009, Ms. Schwartz served on the Federal Reserve Board’s Consumer Advisory Council and in 2010 she founded HOPE LoanPort, a technology non-profit organization that helps families reach and sustain their goal of homeownership. She started her career at Dominion Bancshares Mortgage Company as Vice President of Capital Markets and Wholesale Lending. Ms. Schwartz holds a B.S. from Shippensburg State College and an M.B.A. from the University of Pittsburgh.
The Board of Directors concluded that Ms. Schwartz should be nominated to continue to serve as a director on account of, among other things, the following experience, qualifications, attributes, and skills:
Leadership attributes and management experience
Expertise and experience in the real estate finance industry and the use of technology within this industry
Expertise and experience in the banking and financial services industries
Professional and educational background
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Our Board of Directors currently consists of 10 directors. Our Board of Directors has established three standing committees of the Board: the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee. The membership of each Committee and the function of each Committee are described below. Each of the Committees has adopted a charter and the charters of all Committees are available on our website and in print at the written request of any stockholder addressed to Redwood’s Secretary at our principal executive office.
Our Board of Directors held a total of 27 meetings during 2020. The non-employee directors of Redwood met in executive session at four meetings during 2020. Mr. Baum presided at executive sessions of the non-employee directors during 2020, all of whom qualified as "independent" under Rule 303A of the NYSE Listed Company Manual. No director attended fewer than 75% of the meetings of the Board of Directors and the Committees on which he or she served and all of our then-incumbent directors attended last year’s annual meeting of stockholders, which was conducted solely as a “virtual” meeting, via a live webcast.

Audit Committee. We have a separately-designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The Audit Committee's function includes providing oversight regarding accounting, auditing, risk management, and financial reporting practices of Redwood. The Audit Committee consists solely of non-employee directors, all of whom our Board of Directors has determined are independent within the meaning of the listing standards of the NYSE and the rules of the SEC. Our Board of Directors has determined that all members of the Audit Committee are “financially literate” within the meaning of the applicable regulations and standards and has designated Ms. Proctor as an “audit committee financial expert” within the meaning of the applicable regulations and standards. The Audit Committee met seven times in 2020 in order to carry out its responsibilities, as discussed below under “Audit Committee Matters — Audit Committee Report.”

Compensation Committee. The Compensation Committee’s function includes reviewing and approving Redwood’s compensation philosophy, reviewing the competitiveness of Redwood’s compensation practices, as well as risks that may arise from those practices, determining and approving the annual base salaries and incentive compensation paid to our executive officers, approving the terms and conditions of proposed incentive plans applicable to our executive officers and other employees, approving and overseeing the administration of Redwood’s employee benefit plans, and reviewing and approving hiring and severance arrangements for our executive officers. The Compensation Committee also oversees risk and opportunity related to social matters, which at Redwood includes, among other things, human capital-related matters such as workforce inclusion and diversity initiatives and employee engagement efforts. The Compensation Committee consists solely of non-employee directors, each of whom our Board of Directors has determined is independent within the meaning of the listing standards of the NYSE and are “non-employee directors” within the meaning of the rules of the SEC. The Compensation Committee met 12 times in 2020 in order to carry out its responsibilities, as discussed below under “Executive Compensation — Compensation Discussion and Analysis.”

Governance and Nominating Committee. The Governance and Nominating Committee’s function includes reviewing and considering corporate governance guidelines and principles, evaluating potential director candidates and recommending qualified candidates to the full Board, reviewing the management succession plan and evaluating executives in connection with succession planning, and overseeing the self-evaluation of the Board of Directors. The Governance and Nominating Committee also carries out responsibilities related to the receipt, retention, and treatment of reported concerns related to potential violations of Redwood's Code of Ethics. The Governance and Nominating Committee consists solely of non-employee directors, each of whom our Board of Directors has determined is independent within the meaning of the listing standards of the NYSE. The Governance and Nominating Committee met five times in 2020 in order to carry out its responsibilities.

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Committee Members

The current members of each of the three standing committees are listed below, with the Chair appearing first.
Audit Compensation Governance and Nominating
Greg H. Kubicek Georganne C. Proctor Jeffrey T. Pero
Debora D. Horvath Richard D. Baum Richard D. Baum
George W. Madison Debora D. Horvath Greg H. Kubicek
Georganne C. Proctor Jeffrey T. Pero George W. Madison


DIRECTOR COMPENSATION

Information on our non-employee director cash compensation paid (or currently scheduled to be paid) during the annual periods commencing in May 2019, May 2020, and May 2021, is set forth in the tables below. Non-employee director cash compensation is paid quarterly, in arrears.
Non-Employee Director Cash Compensation
Annual Period Commencing May 1,
20192020 and 2021
Annual Retainer *$85,000 $85,000 
Committee Meeting Fee (in-person attendance)$2,000 $— 
Committee Meeting Fee (telephonic attendance)$1,000 $— 
Retainer for Service as a Committee Member (per Committee)**$— $12,500 
————
* The Chairs of the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee each currently receive an additional annual cash retainer of $20,000, and the additional annual cash retainer payable to the Chairman of the Board of the Directors is currently $75,000.
**For the annual periods commencing at or after May 2020, non-employee directors who are members of Board Committees receive a retainer for their service on each Committee and no longer receive committee meeting attendance fees. In cases where a non-employee director is formally invited to participate in a committee meeting of which he or she is not a member, he or she will be paid $2,000 per meeting for in-person attendance and $1,000 per meeting for telephonic attendance.
After submission of appropriate documentation on a timely basis, non-employee directors are also reimbursed for reasonable out-of-pocket expenses incurred in attending Board and committee meetings, as well as for their and, in some cases, their guests’ attendance at other Redwood-related meetings or events. Non-employee directors may also be reimbursed for out-of-pocket expenses incurred in attending conferences or educational seminars that relate to their Board service and are approved by the Chair of the Governance and Nominating Committee.
Non-employee directors are also granted deferred stock units (“DSUs”), or comparable equity-based awards, each year at the time of the annual meeting of stockholders. The number of deferred stock units granted is determined by dividing the dollar value of the grant by the closing price of Redwood’s common stock on the NYSE on the day of grant (and rounding to the nearest whole share amount). In June 2020, non-employee directors were scheduled to receive an annual DSU grant valued at $110,000; however, as described below under the heading “Reduction in 2020 Director Compensation in Response to Impacts of COVID-19 Pandemic,” the Board of Directors reduced the value of this June 2020 grant to $77,000 (which grant related to the May 2020 to May 2021 annual period). On the 2021 Annual Meeting date, non-employee directors who are re-elected will receive an annual grant of vested DSUs for the May 2021 to May 2022 annual period determined by dividing $110,000 by the closing price of Redwood’s common stock on the meeting date. Non-employee directors may also be granted equity-based awards upon their initial election to the Board. These initial and annual DSU grants are fully vested upon grant, and
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they are generally subject to a mandatory three-year holding period. Dividend equivalent rights on DSUs are generally paid in cash to directors on each dividend distribution date.
Each director may elect to defer receipt of cash compensation or dividend equivalent rights through Redwood's Executive Deferred Compensation Plan. Cash balances in the Executive Deferred Compensation Plan are unsecured liabilities of Redwood and are utilized by Redwood as available capital to fund investments and operations. Based on each director’s election, deferred compensation can either be deferred into a cash account and earn a rate of return that is equivalent to 120% of the applicable long-term federal rate published by the IRS compounded monthly or be deferred into deferred stock units which will, among other things, entitle them to receive dividend equivalent rights related to those units.
Each year the Compensation Committee and Governance and Nominating Committee review Redwood’s compensation of non-employee directors with the assistance of the Compensation Committee’s independent compensation consultant, FW Cook. Any changes to non-employee director compensation recommended by these Committees are subject to review and approval by the Board. For the May 2021 to May 2022 annual period, these Committees intend to review Redwood’s non-employee director compensation in mid-2021, when updated benchmarking data will become available to FW Cook. Any changes to non-employee director compensation that are approved by the Board following this mid-2021 review may increase or decrease non-employee director compensation for the May 2021 to May 2022 annual period from the amounts set forth in the "Non-Employee Director Cash Compensation" table on the preceding page.

Reduction in 2020 Director Compensation in Response to Impacts of COVID-19 Pandemic
As described above, as part of its response to the impact of the COVID-19 pandemic on Redwood, the Board of Directors determined on April 24, 2020 to reduce non-employee directors’ compensation for the May 2020 to May 2021 annual period. In particular, the Board of Directors reduced the value of the annual grant of DSUs that non-employee directors were scheduled to receive in June 2020 by 30%, from $110,000 to $77,000.

Non-Employee Director Compensation — 2020

The following table provides information on non-employee director compensation for the 2020 calendar year. Director compensation is set by the Board and is subject to change. Directors who are employed by Redwood do not receive any compensation for their Board activities.
Name
Fees Earned or Paid in Cash
($)(1)
Stock Awards
($)(2)(3)
All Other
Compensation
($)
Total
($)
Richard D. Baum$179,377 $77,000 $256,377 
Douglas B. Hansen$92,000 $77,000 $169,000 
Mariann Byerwalter(4)
$45,246 $— $45,246 
Debora D. Horvath$104,377 $77,000 $181,377 
Greg H. Kubicek$126,377 $77,000 $203,377 
Fred J. Matera(5)
$45,033 $77,000 $122,033 
George W. Madison(6)
$56,000 $68,134 $124,134 
Jeffrey T. Pero$124,377 $77,000 $201,377 
Georganne C. Proctor$123,377 $77,000 $200,377 
(1)Fees earned are based on the non-employee director compensation policy in place for 2020: (i) annual cash retainer of $85,000 for 2020; (ii) additional annual retainer for the Chairman of the Board of $75,000 for 2020; (iii) additional annual retainer for Audit Committee Chair, Compensation Committee Chair, and Governance and Nominating Committee Chair of $20,000; (iv) committee meeting fee (in-person attendance) of $2,000 per meeting from January to May 2020; (v) committee meeting fee (telephonic attendance) of $1,000 per meeting from January to May 2020, and (vi) an annual committee retainer of $6,250 per committee, which represented a pro-rated amount for the period from May to December 2020.
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(2)Stock awards consisted of an annual grant of vested deferred stock units. The value of deferred stock units awarded was determined in accordance with FASB Accounting Standards Codification Topic 718. The value of dividend equivalent rights associated with deferred stock units was taken into account in establishing the value of these deferred stock units and previously granted deferred stock units. Therefore, dividend equivalent rights payments made during 2020 to non-employee directors are not considered compensation or other amounts reported in the table above. Information regarding the assumptions used to value our non-employee directors' deferred stock units is provided in Note 18 to our consolidated financial statements included in our Annual Report on Form 10‑K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on February 26, 2021.
(3)As of December 31, 2020, the aggregate number of stock awards outstanding for each then-serving non-employee director was as follows: Richard D. Baum had 25,277 vested DSUs; Douglas B. Hansen had 25,277 vested DSUs; Debora D. Horvath had 25,277 vested DSUs; Greg H. Kubicek had 252,765 vested DSUs; George W. Madison had 17,141 vested DSUs; Jeffrey T. Pero had 41,921 vested DSUs; and Georganne C. Proctor had 124,942 vested DSUs.
(4)Ms. Byerwalter retired from Redwood's Board effective June 11, 2020.
(5)The compensation listed on the table above represents the fees that Mr. Matera received as a director from January to June 2020. From June 29, 2020 through November 2020, Mr. Matera served as an officer of Redwood, on an interim basis, and received additional compensation for this service of $381,923 and 51,166 vested DSUs with an aggregate grant date fair value of $379,983. On December 1, 2020, Mr. Matera was formally appointed to serve in an ongoing role as a Redwood officer and resigned from Redwood's Board of Directors. For his service in this ongoing role, Mr. Matera received compensation for the month of December 2020 of $75,000 and 8,445 vested DSUs with an aggregate grant date fair value of $74,992.
(6)Mr. Madison was elected to Redwood's Board on July 1, 2020 and, at that time, received a prorated grant of 9,932 deferred stock units. In addition, during 2020, Mr. Madison elected to defer all $56,000 of his fees earned in cash into 7,209 deferred stock units through Redwood's Executive Deferred Compensation Plan.
The following table provides information on stock unit distributions in common stock to non-employee directors from our Executive Deferred Compensation Plan in 2020. Stock units distributed represent compensation previously granted in prior years and were reported as director or executive compensation in those prior years.
Name
Stock Units
Distributed
(#)(1)
Aggregate Value
of Stock Units
Distributed
($)(2)
Richard D. Baum5,778 $24,557 
Douglas B. Hansen5,778 $24,557 
Mariann Byerwalter(3)
18,596 $103,772 
Debora Horvath5,778 $24,557 
Jeffrey T. Pero8,572 $35,143 
(1)Deferred stock units distributed in 2020 were originally granted in 2017. Ms Byerwalter's 2020 distribution also included deferred stock units granted in 2018 and 2019.
(2)The aggregate value of stock units distributed is calculated by multiplying the number of stock units distributed by the fair market value of Redwood common stock on the date of distribution.
(3)Ms. Byerwalter retired from Redwood's Board effective June 11, 2020.



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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

Executive officers of Redwood as of March 24, 2021 are listed in the table below.
Name Position with Redwood as of March 24, 2021 Age
Christopher J. Abate Chief Executive Officer 41
Dashiell I. RobinsonPresident41
Andrew P. Stone Executive Vice President, Chief Legal Officer & Secretary 50
Collin L. CochraneChief Financial Officer44
Sasha G. MacomberChief Human Resource Officer52
For purposes of this Proxy Statement, each of Mr. Abate, Mr. Robinson, Mr. Stone, Mr. Cochrane, Ms. Macomber and Mr. Stern (who served as an executive officer for a portion of 2020) are Named Executive Officers (“NEOs”). Biographical information regarding these executive officers and Mr. Stern is set forth below.

Christopher J. Abate, age 41, serves as Chief Executive Officer and as a director of Redwood. Mr. Abate has been employed with Redwood since April 2006, previously serving as Redwood’s President from July 2016 to May 2018, Chief Financial Officer from March 2012 to August 2017, and Controller from January 2009 to March 2013. Mr. Abate is currently Chairman of the Board of the Structured Finance Association. Before joining Redwood, Mr. Abate was employed by PricewaterhouseCoopers LLP. He holds a B.A. in Accounting and Finance from Western Michigan University and an M.B.A. from the University of California at Berkeley and Columbia University.

Dashiell I. Robinson, age 41, serves as President of Redwood. He joined the Company as Executive Vice President in September 2017. Prior to joining Redwood, Mr. Robinson was employed at Wells Fargo Securities, serving as the Head of Mortgage Finance within the Asset-Backed Finance Group. In that role, Mr. Robinson led a team of banking professionals responsible for financing and distributing an array of residential mortgage products, and serving a broad suite of the firm's operating and investing clients. Prior to his employment at Wells Fargo, Mr. Robinson was employed within the Structured Credit Products Group at Wachovia Capital Markets from 2001 to 2008, serving in banking, structuring and risk mitigation roles. Mr. Robinson holds a B.A. in English from Georgetown University.

Andrew P. Stone, age 50, serves as Executive Vice President, Chief Legal Officer, and Secretary of Redwood. Mr. Stone has been employed by Redwood since December 2008. Prior to joining Redwood, he served as Deputy General Counsel of Thomas Weisel Partners Group, Inc. from 2006 to 2008 and between 1996 and 2006 practiced corporate and securities law at Sullivan & Cromwell LLP and Brobeck, Phleger & Harrison LLP. Mr. Stone holds a B.A. in Mathematics and History from Kenyon College and a J.D. from New York University School of Law.

Collin L. Cochrane, age 44, serves as Chief Financial Officer of Redwood. Mr. Cochrane has also served as Redwood's Controller and Managing Director since March of 2013. Prior to joining Redwood in 2013, Mr. Cochrane served as Chief Accounting Officer and Controller for iStar Financial Inc., where he was employed from 2001 to March 2013. Prior to joining iStar Financial, Mr. Cochrane was employed as an auditor by Ernst & Young LLP from 1999 to 2001. Mr. Cochrane is a certified public accountant (inactive) and holds a B.S. in Accounting from the Leventhal School of Accounting at the University of Southern California.

Sasha G. Macomber, age 52, serves as Chief Human Resource Officer of Redwood. Prior to joining Redwood, Ms. Macomber spent eleven years with Peet’s Coffee in the San Francisco Bay Area, leading various aspects of human resources including talent acquisition, talent management, HR business partnerships, employee engagement, and leadership communications. Ms. Macomber has also held HR leadership roles within consumer goods and technology companies, including The North Face, Room & Board, and QRS Corporation. Ms. Macomber has a B.A. degree in English Literature from Mills College and a M.S. in Organizational Development from the University of San Francisco.

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Shoshone (“Bo”) Stern, age 43, serves as Managing Director - Portfolio Strategy and Risk for Redwood. Mr. Stern joined Redwood in 2003, and most recently served the Company’s Chief Investment Officer. He previously served as Redwood’s Treasurer from December 2009 to August 2016, and as Managing Director from December 2007 to December 2009. From February 2003 to December 2007, Mr. Stern served in several other management positions at Redwood. Prior to joining Redwood, Mr. Stern was employed by CIBC Oppenheimer in its investment banking group. Mr. Stern holds a B.S. in Business Administration from the University of California at Berkeley and an M.B.A from the University of California at Berkeley and Columbia University; he is also a CFA Charterholder.





25










SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information, as of March 24, 2021, about the beneficial ownership of our common stock by our current directors and executive officers, our NEOs and by all of our current directors executive officers, and NEOs as a group. As indicated in the notes, the table includes common stock equivalents held by these individuals through Redwood-sponsored benefits programs. Except as otherwise indicated and for such power that may be shared with a spouse, each person has sole investment and voting power with respect to the shares shown to be beneficially owned. Beneficial ownership is determined in accordance with the rules of the SEC.

Executive Officers and NEOs
Number of Shares
of Common Stock
Beneficially
Owned(1)
Percent of
Class(2)
Christopher J. Abate(3)
304,115*
Dashiell I. Robinson(4)
150,631*
Andrew P. Stone(5)
145,839*
Collin L. Cochrane(6)
91,376*
Sasha G. Macomber(7)
25,487*
Shoshone ("Bo") Stern(8)
84,368*
Non-Employee Directors   
Richard D. Baum(9)
72,670*
Armando Falcon— 
Douglas B. Hansen(10)
375,935*
Debora D. Horvath(11)
44,400*
Greg H. Kubicek(12)
359,221*
George W. Madison(13)
17,141*
Jeffrey T. Pero(14)
129,170*
Georganne C. Proctor(15)
124,942*
Faith A. Schwartz— 
All directors, executive officers, and NEOs as a group (15 persons)(16)
1,925,2951.69%
* Less than 1%.
(1)Represents shares of common stock outstanding and common stock underlying performance stock units and deferred stock units that have vested or will vest within 60 days of March 24, 2021.
(2)Based on 112,983,272 shares of our common stock outstanding as of March 24, 2021.
(3)Includes 174,543 shares of common stock and 129,572 deferred stock units that have vested or will vest within 60 days of March 24, 2021.
(4)Includes 28,996 shares of common stock and 121,635 deferred stock units that have vested or will vest within 60 days of March 24, 2021.
(5)Includes 96,572 shares of common stock and 49,267 deferred stock units that have vested or will vest within 60 days of March 24, 2021.
(6)Includes 41,517 shares of common stock, and 49,859 deferred stock units that have vested or will vest within 60 days of March 24, 2021.
(7)Includes 139 shares of common stock, and 25,348 deferred stock units that have vested or will vest within 60 days of March 24, 2021.
26










(8)For purposes of this Proxy Statement, Mr. Stern (who served as an executive officer for a portion of 2020) is a Named Executive Officer for 2020. Includes 40,930 shares of common stock, and 43,438 deferred stock units that have vested or will vest within 60 days of March 24, 2021.
(9)Includes 47,393 shares of common stock, and 25,277 deferred stock units.
(10)Includes 350,658 shares of common stock, and 25,277 deferred stock units.
(11)Includes 19,123 shares of common stock, and 25,277 deferred stock units.
(12)Includes 104,543 shares of common stock held in direct ownership, living trusts and through an unaffiliated pension plan, 1,912 shares held of record by Mr. Kubicek’s spouse, and 252,766 vested deferred stock units.
(13)Includes 17,141 deferred stock units.
(14)Includes 87,249 shares of common stock and 41,921 vested deferred stock units.
(15)Includes 124,942 vested deferred stock units.
(16)Includes 993,576 shares of common stock, and 931,719 vested deferred stock units. Mr. Falcon and Ms. Schwartz were elected as non-employee directors on March 30, 2021 and did not beneficially own any shares of common stock at March 24, 2021. On March 30, 2021, in connection with their election to Redwood's Board of Directors, Mr. Falcon and Ms. Schwartz were each granted 1,028 vested deferred stock units as director compensation.


27










SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                
The following table sets forth information as of the dates noted below, with respect to shares of our common stock owned by each person or entity known by us to be the beneficial owner of approximately 5% or more of our common stock.
Name of Beneficial OwnerNumber of Shares
of Common Stock
Beneficially Owned
Percent of
Class(1)
BlackRock, Inc.(2)
19,803,50717.7 %
The Vanguard Group(3)
11,421,92510.2 %
FMR LLC(4)
10,572,4689.4 %
(1)Based on 112,090,060 shares of our common stock outstanding as of December 31, 2020.
(2)Address: 55 East 52nd Street, New York, New York 10055. The information in the above table and this footnote concerning the shares of common stock beneficially owned by BlackRock, Inc. (BlackRock) is based on the amended Schedule 13G filed by BlackRock with the SEC on January 25, 2021, which indicates that BlackRock and certain other subsidiary entities make aggregate reports on Schedule 13G and that such entities, in the aggregate, have sole dispositive power with respect to 19,803,507 shares and sole voting power with respect to 19,494,548 shares.
(3)Address: 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The information in the above table and this footnote concerning the shares of common stock beneficially owned by The Vanguard Group (Vanguard) is based on the amended Schedule 13G filed by Vanguard with the SEC on February 10, 2021, which indicates that Vanguard and certain other subsidiary entities make aggregate reports on Schedule 13G and that such entities, in the aggregate, have sole dispositive power with respect to 11,216,863 shares, shared dispositive power with respect to 205,062 shares, and shared voting power with respect to 116,098 shares.
(4)Address: 245 Summer Street, Boston, Massachusetts 02210. The information in the above table and this footnote concerning the shares of common stock beneficially owned by FMR LLC (FMR) is based on the amended Schedule 13G filed by FMR with the SEC on February 8, 2021, which indicates that FMR and certain other subsidiary entities make aggregate reports on Schedule 13G and that the such entities, in the aggregate, have sole dispositive power with respect to 10,572,468 shares and sole voting power with respect to 1,691,791 shares.

28











EXECUTIVE COMPENSATION

Table of Contents

Executive Summary of Compensation Discussion and Analysis
Compensation Discussion and Analysis (CD&A)39
Section I - Introduction39
Named Executive Officers39
Compensation Committee39
Redwood's Business Model and Internal Management Structure40
Overall Compensation Philosophy and Objectives41
Outreach to Stockholders 42
"Say-on-Pay" Support from Stockholders43
Section II - Executive Compensation in 202044
Redwood's 2020 and Long-Term Performance44
Elements of Compensation in 202045
Process for Compensation Determinations for 202047
Compensation Benchmarking for 202048
2020 Base Salaries50
2020 Performance-Based Annual Bonus Compensation50
Performance-Based Annual Bonuses Earned for 202053
Grant of Mid-2020 Long-Term Incentive Awards and Other Long-Term Incentives55
2020 Long-Term Equity-Based Incentive Awards57
Vesting and Mandatory Holding Periods for 2020 Long-Term Equity-Based Incentive Awards61
Section III - Other Compensation, Plans and Benefits63
Deferred Compensation63
Employee Stock Purchase Plan63
401(k) Plan and Other Matching Contributions63
Other Compensation and Benefits64
Severance and Change of Control Arrangements64
Section IV - Compensation-Related Policies and Tax Considerations66
Mandatory Executive Stock Ownership Requirements66
Prohibition on Use of Margin, Pledging, and Hedging in Respect of Redwood Shares66
Clawback Policy 67
Tax Considerations67
Accounting Standards67
Section V - Conclusion68
Certain Compensation Determinations Relating to 202168
Compensation Committee Report69
Executive Compensation Tables70
Compensation Risks84
CEO Pay Ratio85
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COMPENSATION DISCUSSION & ANALYSIS - EXECUTIVE SUMMARY

Ø Introductory Remarks -
The past year was an unprecedented one for Redwood, punctuated by the impacts of, and necessary strategic and operational responses to, pandemic- and liquidity-related disruptions. Although the market value of Redwood’s common stock recovered significantly from a low point at the end of March 2020, the impact of COVID-19 and of financing market disruptions on Redwood, and its stockholders, was a markedly negative total return for 2020. While it was not designed with a globally-disruptive health pandemic in mind, the pay-for-performance executive compensation program in place at the outset of 2020 responded as it should have – with lowered bonus opportunities and prescribed declines in the value of previously awarded long-term incentives and in the value of executives’ mandated holdings of Redwood common stock. For example, and by design, the negative impact on the value of the CEO’s long-term incentives and personal holdings of Redwood stock, taken together, exceeded the negative return to stockholders by a factor of more than 1.5x (as illustrated by the graph that follows on page 34).
The Compensation Discussion and Analysis (CD&A) that follows is a comprehensive review of how our pay-for-performance approach was maintained over the past year. It illustrates how the Compensation Committee used well-structured mechanisms to continue to align the impacts on, and the interests of, executives and stockholders and, importantly, keep the core of Redwood’s human capital in place as competition for talent intensified with the sharp rebound in industry-wide mortgage loan origination volumes that began in the second quarter of 2020.
Redwood entered 2021 in a renewed position of competitive strength and with ongoing growth following from a necessary strategic repositioning in mid-2020 that led to strong operating and financial results during the third and fourth quarters of 2020. As described in the pages that follow, the compensation program we have in place provides that most of the executive team’s opportunity to realize compensation value over the coming years depends on sustaining this momentum and growth over the long-term.
We look forward to continuing engagement with stockholders, which has proven to be a valuable source of feedback for the Committee. Thank you for taking the time to review this CD&A in advance of the 2021 Annual Meeting of Stockholders.
Georganne C. Proctor,
Chair – Compensation Committee





















30











COMPENSATION PHILOSOPHY

Ø Performance-Based Executive Compensation –

Redwood’s pay-for-performance compensation program is administered by the independent Compensation Committee of the Board of Directors and is designed to:
Incentivize attainment of short- and long-term business and stockholder return objectives, including:
Generating returns-on-equity (ROEs) that support attractive levels of sustainable dividends and increasing book value; and
Meeting annual strategic, operational, sustainability, and risk-management goals.
Align the interests of executives with those of long-term stockholders in achieving strong stockholder returns, in absolute terms and relative to other mortgage REITs and small-cap financial services firms.
Enable Redwood to hire and retain executives with industry expertise in a competitive marketplace.
Market-based benchmarking is used to evaluate compensation relative to peer companies.
Avoid incentivizing inappropriate risk taking.
The Committee seeks to incorporate best practices into Redwood’s executive compensation program and directly engages Frederic W. Cook & Co., Inc., a nationally recognized independent compensation consultant, to advise it. A summary of key best practices and risk mitigants that are part of the compensation program are set forth in the table on page 42 within the main body of CD&A.

STOCKHOLDER ENGAGEMENT- OUTREACH AND FEEDBACK

Ø "Say-on-Pay" Support and Feedback from Stockholders –

Stockholders have consistently supported “Say-on-Pay” at Redwood, with average annual voting support of 90% since “Say-on-Pay” voting began in 2011.
Last year, during the 2020 Annual Meeting of Stockholders, more than 90% of votes cast supported the non-binding “Say-on-Pay” resolution to approve executive compensation.
In addition to receiving this support for the compensation program, the Committee Chair has directly received valuable feedback from stockholders on executive compensation as a result of outreach and engagement.

Ø Consistent Outreach and Engagement with Stockholders –

Redwood has continued its long-standing commitment to outreach and engagement with stockholders regarding executive compensation. The Committee Chair generally leads Redwood’s efforts, which were most recently conducted exclusively by teleconference for social distancing purposes.
Between mid-2020 and early 2021, outreach efforts were made with respect to 23 of Redwood’s top 25 institutional stockholders, which in the aggregate held approximately 60% of then-outstanding shares of Redwood’s common stock.
During this most recent outreach, the Committee Chair engaged directly with stockholders which, in the aggregate, held approximately 30% of then-outstanding shares of Redwood’s common stock.
A further discussion of outreach to, engagement with, and feedback regarding executive compensation from our stockholders is set forth within the main body of CD&A beginning on page 42 under the heading “Outreach to Stockholders”.

31











ELEMENTS OF CEO'S 2020 TARGET COMPENSATION STRUCTURE
Redwood’s business model and internally-managed REIT structure are key factors the Committee has taken into account in designing Redwood’s executive compensation program, determining appropriate metrics, and setting targets and goals for performance-based compensation. At the outset of 2020, target annual compensation for Redwood’s CEO, Mr. Abate, was structured to include the following elements:
CEO's Target Annual Compensation In-Place at the Outset of 2020(1)
elementsofceocomp-proxypiea.jpg
Ø Base Salary/Std. Benefits – Represented less than 15% of the CEO’s 2020 target annual compensation.
Ø Target Bonus – A majority of the CEO’s 2020 target annual bonus was structured to be based on an annual ROE-based performance goal, with the remainder linked to his individual contributions to strategic, operational, sustainability, and risk management goals.
Ø Annual Long-Term Incentives (LTIs) – As part of the annual compensation process, long-term incentives were granted at the end of 2019 in the form of long-term equity-based awards, and are included in the pie chart above.
Performance Stock Units (PSUs) – PSUs with a three-year vesting/performance measurement period represented 50% of the value of the CEO’s 2019 year-end annual LTI grant.
Vesting/realization of value for PSUs is based on of attainment of book value TSR goals and relative TSR performance compared to the component companies of the FTSE Nareit Mortgage REITs Index.
Deferred Stock Units (DSUs) – DSUs with a four-year vesting period represented 50% of the value of the CEO’s 2019 year-end annual LTI grant.
Although vesting occurs pro-rata over time, DSUs are required to be held through the fourth anniversary of grant.
A review of how Redwood’s business and structure factor into the Committee’s consideration and determinations, as well as further detail on the different elements of the CEO’s target annual compensation, are included within the main body of CD&A, beginning on page 40.

________________________
Endnotes are set forth on page 38, following the conclusion of this Executive Summary.

32












IMPACTS OF COVID AND LIQUIDITY DISRUPTIONS ON REDWOOD OVER 2020 - SUMMARY

The summary below provides an overview of the distinct operational and financial market phases that Redwood navigated through during 2020.
Early 2020 – Continued Momentum From 2019. Redwood entered the year after a historic 2019, during which it achieved key strategic milestones and recorded strong annual financial performance. This momentum continued through early 2020.
March 2020 – Pandemic- and Liquidity-Related Financial Market and Operating Disruptions. In mid-March 2020, the mortgage finance markets that Redwood operates in and accesses for liquidity experienced a sudden and severe onset of COVID-related turmoil, and significant portfolio losses resulted as market liquidity evaporated. At the same time, pandemic-related operational challenges emerged, including a shift to remote working and increased competition for leadership and workforce talent.
Redwood Was Outside the Scope of Federal Relief/Liquidity Programs. Due to its private-sector focus, Redwood and its portfolio assets were not within the scope of the COVID-related emergency liquidity and other relief programs provided by the Federal government in response to these market disruptions.
Impacts Differed Among Industry Participants and Intensified Competition for Human Resources. Access to these Federal programs, as well as other differences in business model and sector focus, advantaged certain mortgage-focused firms in the immediate aftermath of the disruptions, promptly leading to increased competition from them for experienced mortgage industry professionals. At Redwood, three Managing Directors and several of their team members within our residential mortgage banking platform voluntarily departed to join a competitor.
Mid-2020 – Necessary Strategic Repositioning. By mid-2020, private-sector financing markets had largely stabilized and changing economic and industry dynamics were emerging. The focus of the executive team sharpened onto recovering unrealized portfolio losses, fortifying the balance sheet, maintaining and enhancing the workforce, and repositioning operating platforms. These management initiatives, taken together with the efforts of all of Redwood’s employees, enabled and initiated a resurgence of business for Redwood over the second half of 2020.
2020 Year-End – Well-Positioned for Growth. Despite the losses and disruptions experienced in 2020, Redwood entered 2021 in a strong competitive and strategic position, with high levels of business volume, an engaged and highly effective workforce, and a restructured and more resilient balance sheet, without having had to resort to the issuance of dilutive capital to navigate the financial challenges presented in the first half of 2020.
The sections of this Executive Summary that follow primarily focus on the compensation of the CEO and trace through this timeline as they review the responsive actions the Committee took to maintain its compensation philosophy and support Redwood’s business and strategic objectives over the course of 2020.
COMPENSATION COMMITTEE'S 2020 ACTIONS - SUMMARY

Ø Overview of Committee’s 2020 Actions. During 2020 the Committee met twelve times. In March 2020, a key focus was monitoring the compensation program, as in-place pay-for-performance structures self-executed and adjusted realizable pay downward based on the negative impact of the pandemic and financing market disruptions on Redwood’s business and stock price. In the middle of the year, the Committee took responsive actions aimed at maintaining its pay-for-performance philosophy, while supporting necessary and forward-looking strategic, operating, and human capital initiatives that repositioned Redwood for growth. At year-end, compensation determinations made by the Committee were consistent with its historic performance-oriented philosophy and continued a go-forward incentive posture for the executive team that aligns their interests with stockholders’ around long-term value creation.

33










MARCH 2020 - FINANCIAL MARKET AND OPERATING DISRUPTIONS
Ø March 2020 – Pandemic- and Liquidity-Related Financing Market and Operating Disruptions. Redwood’s in-place compensation program reflected the impact of pandemic- and liquidity-related losses and disruptions and the decline in Redwood’s stock price. The CEO experienced a prescribed and significant decline in the value of his previously awarded long-term equity-based incentive awards and his personal holdings of Redwood common stock, as well as a meaningful reduction in his annual bonus opportunity for 2020.
Steep Decline in Value of In-Place Long-Term Incentives. The value of outstanding LTI awards (PSUs and DSUs) granted to the CEO over the prior four years declined in value by approximately 70% over the course of 2020. In addition, the value of the CEO’s holdings of RWT common stock declined in line with stockholders over the course of 2020.
Decline in Value of CEO’s Holdings Exceeded Decline Experienced by Stockholders
In mid-March 2020, pandemic- and liquidity-related financing market disruptions severely impacted Redwood and its stock price. A partial recovery in value followed over the remainder of 2020, largely due to management’s responsive actions, along with the workforce’s efforts, to carry out a necessary strategic repositioning of Redwood’s business.
As prescribed by Redwood’s performance-based compensation program, significant portions of the CEO’s compensation over the past four years were LTI awards that remained unvested or undelivered.
These outstanding LTI awards experienced, in total, a more pronounced decline in value than Redwood’s common stock during 2020. At the same time, the CEO’s personal holdings of common stock experienced a decline in value during 2020 proportional to the decline experienced by Redwood’s stockholders.
ceoequityperformanceproxyca.jpg
______________________
Endnotes are set forth on page 38, following the conclusion of this Executive Summary.
34











MID-2020 - STRATEGIC REPOSITIONING; COMPETITION FOR HUMAN RESOURCES
Ø Mid-2020 – Necessary Strategic Repositioning. As the severe market and operating disruptions of the first quarter of 2020 subsided and the business environment began to stabilize, in mid-2020 management initiated a repositioning of Redwood’s operating platforms, financing facilities and balance sheet, without resorting to a dilutive capital raise. At the same time, as detailed below, increased competition for human resources emerged, resulting in talent being recruited away from Redwood.
Go-Forward Impact of Key In-Place Short- and Long-Term Incentives Effectively Eliminated. As a result of Redwood’s realized losses and the decline in its common stock price, key in-place incentives no longer provided a meaningful or realizable compensation opportunity for the CEO.
The value of the 2017, 2018, and 2019 annual PSU grants to the CEO was effectively eliminated, as threshold performance goals became, as a practical matter, unachievable.
The majority of the CEO’s 2020 bonus opportunity, which was tied to annual ROE, was effectively eliminated.
Committee Supported Repositioning with Mid-Year Incentive Awards and Updated Goals for Earning a Below-Target Annual Bonus. The Committee supported Redwood’s strategic repositioning with mid-year awards to a broad cohort of Redwood’s workforce, bolstering employee retention against the backdrop of heightened labor market competition. The Committee’s structure for mid-year LTI awards for the executive team was designed to incentivize and reward successful execution of the go-forward business strategy over the long-term.
The CEO’s mid-year LTI award provides the opportunity to realize significant value after strong long-term performance, with realizable value predominantly contingent on the delivery of above-market stockholder returns over a multi-year period (see graph that follows on page 37).
Updated strategic and operational goals were established with input from the Board and provided the CEO with an opportunity to earn a below-target 2020 bonus.
timelineonhrproxychart1a.jpg

35











2020 YEAR-END COMPENSATION DETERMINATIONS
Ø Committee’s 2020 Year-End Compensation Determinations Were Consistent with Pay-for-Performance Philosophy. In December 2020, the Committee completed its annual executive compensation process. The Committee’s year-end determinations for the CEO reflected a continued commitment to its performance-oriented philosophy, with key elements of compensation specifically designed to support the successful execution of Redwood’s go-forward strategy.
Appropriate Pay-for-Performance Results. Redwood’s compensation program responded appropriately to the challenges of 2020, with comparatively greater losses in the CEO’s incentive compensation value than those experienced by stockholders.
2020 Annual Bonus – Below Target. The CEO received no ROE-based financial performance-based component of 2020 annual bonus.
The Committee provided the CEO with a below-target 2020 bonus, which represented a 56% decrease from his 2019 annual bonus.
CEO’s actual 2020 annual bonus (67% of target amount) was primarily based on strong achievement of the strategic and operating goals that were updated at mid-year to support Redwood’s necessary strategic repositioning following pandemic- and liquidity-related disruptions.
2017 & 2016 Long-Term Incentives – Forfeiture / Significant Unrealized Value. PSUs and DSUs granted to the CEO in 2017 and 2016, respectively, reached the end of their 3- and 4-year vesting terms and were forfeited or delivered at lowered realized value on their scheduled vesting/delivery dates at year-end 2020.
PSUs granted in 2017 were forfeited, as threshold performance goals were not achieved.
DSUs granted in 2016 fully vested based on continued service, but were delivered at a realized value significantly below their original grant date value.
2021 Target Annual Compensation. The CEO’s 2021 base salary, 2021 target bonus, and 2021 year-end equity incentive award value were all held flat with the levels set at the end of 2019.
CEO'S GO-FORWARD INCENTIVE POSTURE
Ø CEO’s Go-Forward Long-Term Incentives. Incentive compensation structures in place for the CEO at the outset of 2021 align his interests with those of stockholders over the long-term, as illustrated in the graph on the following page.
Long-Term Value Realization Scenarios. The CEO will only realize significant value from long-term incentives in place at the outset of 2021 if Redwood is able to generate high returns on both an absolute and relative basis over the next three years.
Long-term incentives in-place at 1/1/2021 for the CEO include:
the DSUs granted at year-end 2020, as well as unvested/undelivered DSUs granted in prior years, which have vesting schedules based on continued service periods that conclude over the next four years;
the PSUs granted at year-end 2020, which have performance-based vesting/value realization after three years based on attainment of book value TSR goals and relative three-year TSR performance compared to the component companies of the FTSE Nareit Mortgage REITs Index (PSUs granted in 2018 and 2019 are estimated to have no future value); and
the Mid-2020 LTI award, the value of which will not increase above baseline unless relative three-year TSR is above the 60th percentile of the component companies of the S&P 600 Small Cap Financials Index.

36











Illustration of CEO's Go-Forward Long-Term Incentives
ltiscenarios1a.jpg
Illustrative Scenarios:
Basic (Flat) TSR:
Strong TSR:
Superior TSR:
Redwood Performance:
3-Year TSR (absolute)………………..................
0%
+50%
+100%
3-Year TSR (relative).…………………………....
25th percentile
50th percentile
75th percentile
3-Year Return / Value Realization:
Total Return to Stockholders (absolute)….........
0%
+50%
+100%
CEO’s LTI Value Realization………………….....
-24%
+43%
+155%

Ø In-Place Long-Term Incentive Package Structured Based on Pay-for-Performance Alignment Principles. As illustrated above, estimated value realization from the CEO’s long-term incentives that were in-place at the outset of 2020 will decrease by 24% in the Basic (Flat) TSR Scenario. In the Strong TSR Scenario, estimated value realization by the CEO from these LTIs will increase by 43%, but lag stockholders’ 50% total return. Only in the Superior TSR scenario – in which Redwood has performance over three years superior to the median of peer comparator groups and providing stockholders with an absolute total return of 100% – does value realization increase for the CEO outpace stockholder returns.






____________________
Endnotes are set forth on page 38, following the conclusion of this Executive Summary.

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Ø Endnotes to Executive Summary of CD&A.
The following endnotes accompany the foregoing Executive Summary, organized by section heading and title of graphic element that corresponds to endnote:

ELEMENTS OF CEO’S 2020 TARGET COMPENSATION STRUCTURE –
CEO’S TARGET ANNUAL COMPENSATION IN-PLACE AT THE OUTSET OF 2020:
(1) The CEO’s target annual compensation in-place at the outset of 2020 included the following elements, as in effect on January 1, 2020: base salary rate of $800,000; target 2020 annual bonus of $1.48 million (75% component of target structured at 1/1/2020 to be realizable based on achievement of an annual 2020 ROE-based financial goal and 25% component of target structured at 1/1/2020 to be realizable based on individual performance over 2020); estimated $46,000 value of standard benefits; DSUs awarded on December 12, 2019 with a grant date value of $1.875 million; and PSUs awarded on December 12, 2019 with a grant date value of $1.875 million. Additional detail regarding the CEO’s target annual compensation is included within the main body of CD&A.

MARCH 2020–FINANCIAL MARKET AND OPERATING DISRUPTIONS –
VALUE OF CEO’S RWT COMMON STOCK AND IN-PLACE EQUITY-BASED INCENTIVE AWARDS AT 1/1/2020:
(2) The value of the CEO’s Redwood (RWT) common stock and in-place equity incentive awards at 1/1/2020 is based on: (i) valuing common stock, as well as vested and unvested DSUs, held by the CEO at 1/1/2020 at the immediately prior closing price per share of $16.54 and (ii) valuing unvested PSUs held by the CEO at 1/1/2020 at the immediately prior closing price per share of $16.54 multiplied by the number of target award shares. Values displayed for common stock and DSUs on 4/1/20, 7/1/20, 10/1/20 and 12/31/20 reflect the application of the then-most recent prior closing price per share to the number of DSUs and shares of common stock held as of 1/1/2020, after reflecting the settlement and distribution of any DSUs during the applicable time period; value of PSUs on 4/1/20, 7/1/20, 10/1/20 and 12/31/20 are estimated to be zero. Because the graph is intended to illustrate the impact on the CEO’s holdings as of 1/1/2020, the graph does not include the value of DSUs and PSUs awarded in mid-December 2020 as part of the 2020 year-end compensation process. Additional detail regarding DSUs and PSUs awarded in mid-December 2020 as part of the 2020 year-end compensation process are included within the main body of CD&A.

CEO’S GO-FORWARD INCENTIVE POSTURE –
ILLUSTRATION OF CEO’S GO-FORWARD LONG-TERM INCENTIVES:
(3) The value of the CEO’s in-place long-term incentives at 1/1/2021 is based on: (i) PSUs awarded on December 16, 2020 being assumed to vest at target and valued at the closing price per RWT share on 12/31/2020 of $8.78 (and PSUs awarded in 2019 and 2018 being valued at zero); (ii) vested and unvested DSUs (whether structured to be settled in cash or stock) being valued at the closing price per RWT share on 12/31/2020 of $8.78; and (iii) mid-year 2020 long-term incentive award being valued at $1 million (the value realization amount that corresponds with 50th percentile 3-year relative TSR performance). Additional detail on the structure of these long-term incentives is included within the main body of CD&A.
(4) The three performance scenarios illustrated – Superior TSR / Strong TSR / Basic (Flat) TSR – assume the following performance and value realization (and do not incorporate any estimate of grants of additional long-term incentives that could occur in the future): (i) for DSUs (whether structured to be settled in cash or stock), value moves in line with absolute TSR performance applicable to the scenario and delivery of shares underlying DSUs is assumed to be deferred until the conclusion of the three-year period illustrated; (ii) for PSUs, value moves in line with absolute TSR performance applicable to the scenario and assumes performance-based vesting at 0%, 100% and 200% of target, respectively, with book value TSR over the three-year period illustrated assumed to be at target level; and (iii) for mid-year 2020 long-term incentive award, value moves in line with vesting implied by 25th, 50th, and 75th percentile 3-year relative TSR performance, respectively. Additional detail on the structure of these long-term incentives is included within the main body of CD&A.
[END OF EXECUTIVE SUMMARY]
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Compensation Discussion and Analysis (CD&A)

In accordance with SEC regulations, this CD&A is focused on the compensation of Redwood’s Named Executive Officers (“NEOs”) for 2020, although it also provides some general discussion and analysis of aspects of Redwood’s compensation programs, plans, and practices that apply to all of Redwood’s officers and employees.

Section I - Introduction
ØNamed Executive Officers
ØCompensation Committee
ØRedwood's Business Model and Internal Management Structure
ØOverall Compensation Philosophy and Objectives
ØOutreach to Stockholders
Ø“Say-on-Pay” Support from Stockholders

Named Executive Officers
Under SEC regulations, Redwood had six NEOs for 2020, who are listed below together with each NEO’s current title at Redwood.

Named Executive Officers
Christopher J. Abate, Chief Executive Officer
Dashiell I. Robinson, President
Andrew P. Stone, Executive Vice President, Chief Legal Officer, and Secretary
Collin L. Cochrane, Chief Financial Officer
Sasha G. Macomber, Chief Human Resource Officer
Shoshone (Bo) Stern, Managing Director – Portfolio Strategy and Risk

Compensation Committee
The Committee is committed to providing disclosure within this CD&A that gives insight into the process by which it arrives at executive compensation determinations and the underlying rationales. Among other things, this CD&A describes:
The Committee’s process for reviewing and determining the elements of the compensation of the Chief Executive Officer (“CEO”) and of the other NEOs.
The rationale for the different elements of the NEOs’ compensation and Redwood’s compensation philosophy, objectives, and methodology for competitive benchmarking.
The metrics and goals used for performance-based compensation and factors taken into account in the Committee’s determination of whether those metrics and goals were satisfied.
The severance and change of control payments that NEOs may become entitled to receive under certain circumstances.
The role of the Committee’s independent compensation consultant.
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The Committee generally meets at least four times annually and, over the course of an annual period, reviews Redwood’s compensation philosophy and its executive compensation plans and programs. After taking into account various factors and analyses, including those described in this CD&A, input from its independent compensation consultant, feedback from stockholders obtained during ongoing outreach efforts, and the outcome of recent stockholder advisory votes on executive compensation (commonly referred to as “Say-on-Pay” votes), the Committee makes compensation determinations it believes are appropriate in light of its executive compensation objectives.
As noted within the preceding “Executive Summary of CD&A” beginning on page 30 of this Proxy Statement, 2020 was an unprecedented year for Redwood, marked by the impacts of, and strategic and operational responses to, COVID-19 pandemic- and liquidity-related disruptions. As a result, the Committee met twelve times over the course of 2020 to monitor how Redwood’s in-place compensation programs and practices were responding to these unprecedented circumstances, as well as to take appropriate actions to ensure that Redwood’s compensation programs continued to support Redwood in hiring, retaining and incentivizing its executive team and workforce, while at the same time continuing to align their interests with those of long-term stockholders.

Redwood’s Business Model and Internal Management Structure
Redwood is a specialty finance company structured as an internally-managed real estate investment trust (“REIT”). The nature of Redwood’s business model and internally-managed structure are key factors the Committee has considered in designing Redwood’s executive compensation program and determining appropriate metrics and setting targets and goals for performance-based compensation.
Under the Internal Revenue Code, REITs are required to distribute as dividends at least 90% of the income earned under their REIT status. As a result, like other REITs, Redwood is limited in its ability to grow book value and its equity capital base through the reinvestment of retained earnings, and a key element of returns to stockholders is the level of dividends paid on shares of Redwood’s common stock.
Redwood’s primary sources of income are net interest income from its investments and non-interest income from the mortgage banking activities it conducts through its operating platforms. Net interest income consists of the interest income earned on investments less the interest expense incurred on borrowed funds and other liabilities. Income from mortgage banking activities is generated through the origination and acquisition of loans, and their subsequent sale, securitization, or transfer to Redwood’s investment portfolios. Additional details regarding Redwood’s business model include:

Key Aspects of Redwood's Business Model. Redwood’s business segments occupy a unique position in the housing finance value chain, providing liquidity to growing sectors of the U.S. housing market not served by government programs.
Residential Lending. Through its Residential Mortgage Banking platform, Redwood is focused on acquiring, selling and securitizing private sector residential mortgages (e.g., jumbo mortgages) for owner-occupied housing originated by third-party firms (banks and independent mortgage companies). Redwood does not originate residential mortgages and does not generally transact in mortgages guaranteed by Fannie Mae/Freddie Mac or the Federal government. As part of this business segment, Redwood also invests in assets created by this operating platform, primarily securities retained from securitization transactions.
Business Purpose Lending (“BPL”). Through its Business Purpose Lending platform, Redwood is focused on originating and transacting in business purpose mortgage loans for investor-owned housing (e.g., single-family rental housing). Redwood’s activities in this segment also include securitization of single-family rental mortgage loans. As part of this business segment, Redwood also invests in assets created by this lending platform, including securities retained from securitization transactions and certain types of business purpose mortgage loans.

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Third Party Investments. Redwood’s other investments are generally comprised of a diverse mix of residential, business purpose and multifamily mortgage and other housing credit-focused investments. The assets that Redwood invests in are generally not guaranteed by Fannie Mae/Freddie Mac or the Federal government.
Redwood’s business model and internally-managed REIT structure, inform the Committee’s selection of performance metrics and goals used in its performance-based compensation plans. In addition to total stockholder returns (“TSR”), the Committee believes that return-on-equity (“ROE”), book value total stockholder return (“bvTSR”), and other profit-based measures are highly relevant metrics for determining annual bonuses and measuring longer-term performance because: (i) these financial performance measures should correlate with Redwood’s ability to increase book value and pay attractive levels of sustainable and growing dividends; (ii) management has “line-of-sight” into how its strategic and operational decisions impact these financial performance measures; and (iii) over the long-term, strong results under these financial performance measures should correlate with strong TSR. Redwood’s approach to using leverage to finance its business and investments, as well as its approach to managing liquidity risk, are factored in when the Committee sets financial performance goals.

Overall Compensation Philosophy and Objectives
Redwood maintains a performance-based compensation philosophy and program for its executive officers that seeks to provide incentives to achieve both short- and long-term business and stockholder return objectives, align the interests of executive officers with those of long-term stockholders, and enable it to hire and retain talented individuals in a competitive marketplace. The Committee is responsible for evaluating Redwood’s executive compensation programs, plans, and practices to ensure that they provide proper incentives and appropriately support Redwood’s business model and performance objectives without creating risks that are likely to have a material adverse effect on Redwood.
Redwood’s executive compensation objectives are as follows:
Motivate executives to enhance the overall performance and profitability of Redwood, both on a short- and a long-term basis, including by:
Generating ROEs that support payment of attractive levels of sustainable and growing dividends and increasing book value; and
Meeting annual strategic, operational, sustainability, and risk-management goals;
Align the interests of executives with those of long-term stockholders in achieving strong stockholder returns, on both an absolute and relative basis;
Ensure that compensation opportunities are competitive to enable Redwood to attract and retain highly qualified executives with industry expertise in a competitive marketplace; and
Avoid incentivizing inappropriate risk taking.
Consistent with prior years, during 2020, the Committee, with input and guidance from its independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”), engaged in a review of the structure of Redwood’s executive compensation program. This included a review of the elements of executive compensation, the mix of annual and long-term compensation, the compensation benchmarking peer group, the overall competitiveness of target levels of cash and equity-based compensation, and the mechanisms through which Redwood’s pay-for-performance philosophy is implemented. In following this process each year, the Committee seeks to incorporate evolving best practices and risk mitigants into Redwood’s executive compensation program, including those outlined below.



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Executive Compensation – Key Practices & Risk Mitigants
What Redwood Does
What Redwood Does Not Do
ü
Directly links annual bonus to financial and operating performance
×
No guaranteed annual bonuses; no uncapped annual bonuses
ü
Uses profitability- and return-based financial metrics, including TSR, to support alignment with stockholders
×
No revenue- or volume-based financial metrics are used in a manner that could incentivize inappropriate risk taking
ü
Imposes three- or four-year vesting/holding periods on annual equity grants of DSUs and PSUs
×
No above-target vesting of PSUs if TSR over the three-year performance measurement period is negative
ü
Retains authority at the Compensation Committee level to use discretion to reduce annual bonus amounts
×
No “single-trigger” change-in-control severance payments or acceleration of equity award vesting
ü
Maintains robust stock ownership requirements for executives
×
No excise tax gross-ups for any change-in-control related payments
ü
Maintains a “clawback” policy if fraud or misconduct results in a financial restatement
×
No margin, pledging, or hedging transactions permitted with respect to Redwood common stock

Outreach to Stockholders
Outreach to stockholders regarding executive compensation during mid-2020 and early 2021, as well as over the past several years has provided Redwood with the opportunity to discuss and receive stockholder feedback regarding Redwood’s philosophy and views on executive compensation and specific compensation practices.
Independent Committee Chair Active in Ongoing Outreach to Stockholders. The Chair of the Committee generally leads Redwood’s stockholder outreach and engagement efforts, with members of Redwood’s management also participating. In mid-2020 and early 2021, outreach primarily took the form of teleconferences with institutional stockholders. In-person meetings did not take place due to the pandemic.
Mid-2020 / Early 2021 Outreach Efforts. Between mid-2020 and early 2021, Redwood made outreach efforts to 23 of Redwood’s top 25 institutional stockholders, which in the aggregate held approximately 60% of then-outstanding shares of Redwood’s common stock.
Mid-2020 / Early 2021 Engagement Response. These outreach efforts resulted in an engagement response from institutional holders of approximately 50% Redwood’s then-outstanding common stock. Engagement responses included teleconferences in mid-2020 and early 2021 between the Chair of the Committee and institutional stockholders which held, in the aggregate, approximately 30% of then-outstanding shares of Redwood’s common stock. (Certain stockholders responded to these outreach efforts by indicating that previous engagements with Redwood continued to provide the information needed to support their understanding of Redwood’s executive compensation program.)
Mid-2020 / Early 2021 Feedback from Stockholders. Feedback provided to the Chair of the Committee during stockholder engagement included commentary that the Committee had been thoughtful about pay design generally and about appropriate compensation-related responses to the pandemic. Other examples of executive compensation topics discussed during stockholder engagement included:
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The operating and financial performance metrics that should drive performance-based compensation determinations, with several stockholders providing feedback about how the continued use of relative performance measures for performance-based long-term incentives is an appropriate mechanism for aligning executives’ and stockholders’ interests.
The importance of retaining key human resources during a disrupted and volatile 2020, particularly when competition for mortgage-industry talent increased in mid-2020, and the responsiveness of the actions undertaken by management and the Committee.
How environmental, social, and governance (“ESG”) topics are addressed in Redwood’s current executive compensation program and the extent to which performance-based compensation is tied to specific ESG metrics or goals; and related emerging practices among publicly-traded companies.
The policies and procedures stockholders follow, and the data points stockholders use, in analyzing Redwood’s executive compensation program and how their analysis impacts their “Say-on-Pay” vote at Redwood’s annual meetings.
Consistent Outreach and Feedback Over Multiple Years. Outreach to stockholders regarding executive compensation has been a consistent practice at Redwood. Over past years, the Chair of the Committee has met in person and telephonically with institutional stockholders both following the publication of Redwood’s annual proxy statement (i.e., during “proxy season”) and outside of “proxy season”, which often allows for more extensive and in-depth discussions. Additional outreach by the Chair of the Committee to institutional stockholders is contemplated in the future, including in-person meetings when practicable and appropriate.
Feedback provided to the Chair of the Committee during stockholder engagement has impacted the Committee’s approach to executive compensation, including the following decisions:
The decision in 2020 to continue delivering a majority of the CEO’s target annual compensation in the form of long-term incentive awards, with half of long-term equity-based awards in the form of PSUs.
The decision in 2020 to continue to use relative TSR as a key performance-based vesting metric in long-term incentive structures.
The decision to continue to mandate that executives maintain certain holdings of common stock, as well as to impose mandatory holding periods on common stock underlying vested equity-based incentive awards.
The decision in a previous year to update the structure of performance-based equity awards to include bvTSR as a primary performance metric, along with relative TSR as a secondary performance metric.
The Committee believes that this ongoing stockholder outreach process results in a more detailed understanding of recent “Say-on-Pay” voting results and provides a forum for valuable feedback from stockholders regarding their views on Redwood’s executive compensation philosophy, practices and disclosures.

“Say-on-Pay” Support from Stockholders
Last year, more than 90% of stockholder votes cast at the June 2020 Annual Meeting of Stockholders supported the non-binding “Say-on-Pay” resolution to approve executive compensation, consistent with Redwood’s average of 90% support since the inception of “Say-on-Pay” voting in 2011.

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Section II - Executive Compensation in 2020
ØRedwood's 2020 and Long-Term Performance
ØElements of Compensation in 2020
ØProcess for Compensation Determinations for 2020
ØCompensation Benchmarking for 2020
Ø2020 Base Salaries
Ø2020 Performance-Based Annual Bonus Compensation
ØPerformance-Based Annual Bonuses Earned for 2020
ØGrant of Mid-2020 Long-Term Incentive Awards and Other Long-Term Incentives
Ø2020 Long-Term Equity-Based Incentive Awards
ØVesting and Mandatory Holding Periods for 2020 Long-Term Equity-Based Incentive Awards

Redwood’s 2020 and Long-Term Performance

As noted within the preceding “Executive Summary of CD&A” beginning on page 30 of this Proxy Statement, 2020 was an unprecedented year for Redwood, marked by the impacts of, and necessary strategic and operational responses to, COVID-19 pandemic- and liquidity-related disruptions. In particular, in mid-March 2020, the mortgage finance markets that Redwood operates in and accesses for liquidity experienced a sudden and severe onset of COVID-related turmoil, and significant portfolio losses resulted as market liquidity evaporated; at the same time, the pandemic itself presented operational challenges to Redwood’s operating platforms. By mid-2020, management’s response to the pandemic- and liquidity-related financial and operational challenges positioned Redwood for a substantial recovery of unrealized losses, and a resurgence of activity in its operating platforms over the second half of 2020. However, the realized losses and operating disruptions that resulted from pandemic- and liquidity-related impacts had pronounced and negative effects on Redwood’s financial performance in 2020 and the also negatively impacted Redwood’s long-term TSR, as detailed below:
Redwood’s 2020 Annual Financial Performance and Long-Term TSR
2020 Annual Financial Performance
GAAP net loss per diluted common share was $5.12 for the full year 2020
2020 book value total stockholder return (“bvTSR”) was -33%, which represents the change in GAAP book value, plus cash dividends paid
2020 return-on-equity (“ROE”) was -52% (based on 2020 GAAP financial results)
Redwood paid $0.725 per share in dividends in 2020, a 40% decrease from dividends paid in 2019
Long-Term TSR
Three-year TSR was -26%


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Elements of Compensation in 2020
Annual Cash Compensation – Base Salary and Bonus
In 2020, annual cash compensation for Redwood’s NEOs included a base salary and a performance-based annual bonus. At the outset of 2020, annual bonuses for NEOs were structured to be determined primarily based on Redwood’s financial performance, with individual performance as a secondary determinant. In mid-2020, however, in response to the pandemic- and liquidity-related impacts, and as further described below, the Committee (i) reduced each NEO’s target bonus opportunity and (ii) shifted the primary determinant of 2020 annual bonuses to focus on individual contributions in support of the necessary strategic repositioning Redwood undertook following the severe pandemic- and liquidity-related disruptions during the first half of 2020. In connection with this change, strategic and operating goals for Redwood’s executive officers were updated by the Committee at mid-year 2020 to focus on this repositioning.
For each NEO, the Committee established a target annual bonus amount that was in place at the beginning of 2020. Based on that target amount, under Redwood’s executive compensation program, each NEO would have had an opportunity to earn an annual target bonus for 2020 if Redwood’s financial performance met a target scheduled to be established by the Committee before the end of March 2020 (referred to in this CD&A as the company performance component of target bonus or company performance bonus) and if the NEO’s individual performance merited target-level payment (referred to in this CD&A as the individual performance component of target bonus or individual performance bonus).
The Committee generally intends that the base salary and annual bonus target for each NEO be appropriate in comparison to a market-based median benchmark, after taking into account factors such as the NEO’s role and responsibilities, competitive factors, and internal equity. In addition, the Committee believes that performance-based bonuses for each NEO should have adequate upside so that total annual compensation actually earned may be meaningfully above the median of the market-based benchmark for strong performance.
The market-based benchmarks used by the Committee for 2020 were determined with the assistance of the Committee’s independent compensation consultant, FW Cook. The process included reviewing compensation practices of peer companies selected by the Committee (referred to in this CD&A as the compensation benchmarking peer group) as well as other market-based benchmarking data provided to FW Cook by Aon plc, a third-party firm that is nationally recognized as qualified to provide such data. Further details regarding the compensation benchmarking peer group and benchmarking practices are provided on pages 48-50 within this CD&A under the heading “Compensation Benchmarking for 2020.”
As noted within the preceding “Executive Summary of CD&A” beginning on page 30 of this Proxy Statement, in mid-March 2020, as private-sector mortgage financing markets were severely disrupted in connection with the onset of the COVID pandemic, the price of Redwood’s common stock declined steeply. The Committee had a regular quarterly meeting scheduled on March 18, 2020, during which the Committee had planned to establish the financial performance target for the company performance component of each executive’s 2020 target bonus. Although the Committee did meet on March 18, 2020, given the substantial pandemic- and liquidity-related disruptions in financial markets that were occurring at the time and the negative impact of these disruptions on Redwood, the Committee determined not to establish the 2020 financial performance target on March 18, 2020 and, instead, commenced a process of considering changes to the program to appropriately account for the impacts of the these disruptions. Subsequently, after review and discussion of various considerations and potential modifications to the program, and after obtaining the input of FW Cook, at a meeting on August 5, 2020, the Committee made the following determinations with respect to 2020 target annual bonuses for executives:
Eliminate the ability of executive officers to earn the company performance component of their 2020 target annual bonuses; and
Continue to provide each executive officer with an opportunity to earn a portion of his or her 2020 target annual bonus based on a year-end review of his or her individual contribution to updated 2020 company goals related to recovering from the impact of these disruptions and positioning Redwood for future growth.
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The following table details the components of the NEOs’ 2020 target annual bonus opportunities, as in place at the beginning of 2020, and as updated by the Compensation Committee on August 5, 2020, and illustrates the Committee’s reduction of the 2020 target annual bonus opportunity for NEOs to 33% of the level previously approved and in place at the outset of 2020.
Mid-Year Reduction in NEOs’ 2020 Target Bonus Opportunity
Component of 2020 Target Annual Bonus Opportunity
In-Place at the Outset of 2020
Mid-2020 Update
Company financial performance component (ROE-based):
75% of target
0% of target
Individual performance component:
25% of target
33% of target
Total 2020 target bonus opportunity:(1)
100% of target
33% of target
__________________________
(1) Total 2020 target bonus opportunity expressed as a percentage of target bonus in place at the outset of 2020.

In connection with the reduction to the NEOs’ 2020 target annual bonus opportunity, the Committee determined to continue its historical practice that the individual performance component of annual bonuses could be earned up to two times the target amount for that component, depending on the Committee’s year-end assessment of individual performance.
Mid-Year 2020 Long-Term Incentives
As noted above and within the preceding “Executive Summary of CD&A”, subsequent to its meeting on March 18, 2020, the Committee commenced considering appropriate changes to the executive compensation program in light of the pandemic- and liquidity-related impacts on Redwood and the markets and business environment in which it operates. Prior to making any changes to the program with respect to NEOs, in July 2020, the Committee and management took action to support Redwood’s necessary strategic repositioning by approving mid-year retention awards to a broad cohort of Redwood’s workforce below the NEO level, bolstering employee retention against the backdrop of heightened labor market competition that emerged as the severe market and operating disruptions of the first quarter of 2020 subsided and the business environment began to stabilize. The Committee recognized that competition for mortgage-industry talent had intensified, in part, because different participants in the mortgage industry experienced differing impacts from the pandemic- and liquidity-related disruptions. For example, government-sector focused firms were generally advantaged in the immediate aftermath of these disruptions, spurring increased demand from them for experienced mortgage industry professionals. In this context, in June 2020, three key Managing Directors within Redwood’s Residential Mortgage Banking platform voluntarily departed to a competitor and other experienced capital markets- and operations-focused team members also voluntarily departed in mid-2020. These departures took place despite the consequence to the departing employees of forfeiting significant amounts of unvested equity-based awards. These events prompted the Committee to review the effectiveness of in-place incentives designed to support leadership and workforce retention.
Following this review, the Committee determined on August 5, 2020 to provide long-term incentive awards to certain NEOs designed to incentivize future outperformance on a relative TSR basis, while also providing a basic long-term retention incentive, through a grant of long-term incentives with a cash settlement structure intended to limit potential dilution to shareholders (collectively the “Mid-2020 LTI Awards”). Redwood’s CFO did not receive a Mid-2020 LTI Award, as he had received a long-term incentive early in 2020 as part of succession planning following the late 2019 departure of Redwood’s then-Principal Accounting Officer, as further discussed below under “Other Long-Term Incentives”.
Each NEO who received a Mid-2020 LTI Award received a grant of a Long-Term Relative TSR Performance Vesting Cash Award together with a Three-Year Vesting Cash Award. The Long-Term Relative TSR Performance Vesting Cash Awards granted on August 5, 2020 will vest with a realized value of between 0% and 400% of the granted award value on the third anniversary of the grant date based on relative TSR and continued service. The Three-Year Vesting Cash Awards granted on August 5, 2020 will vest over three years based on continued service. A
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further discussion of the Mid-2020 LTI Awards granted to NEOs is set forth below under the heading “Grant of Mid-2020 Long-Term Incentive Awards”.
Long-Term Equity-Based Incentive Compensation
With respect to long-term equity-based incentive compensation, the Committee generally makes annual awards to NEOs in amounts, and subject to terms and vesting conditions, that provide an incentive to create long-term stockholder value and align the interests of NEOs with those of long-term stockholders. These awards are intended to provide compensation opportunities linked to Redwood’s performance at levels that will be effective in retaining valued and productive executives. In determining the size of annual long-term equity-based incentive compensation opportunities, the Committee uses the same or similar considerations as when setting salaries and target annual bonus opportunities, with the value actually delivered dependent on subsequent performance. For 2020, the value of annual long-term equity-based incentive compensation granted at year-end to NEOs was determined after taking into account the Committee’s philosophy that:
Competitive pressure on NEO compensation levels from higher-paying related market sectors should be addressed with long-term equity-based incentive awards, while long-term equity-based incentive awards may be targeted above the median if justified by performance, experience, or the scope of the individual’s role.
The terms and vesting conditions of long-term equity-based incentive awards should result in realized compensation for NEOs that correlates with long-term stockholder value creation (through dividend distributions and share-price growth) over a minimum of three years. The value of long-term equity-based incentive award grants should also take into account Redwood’s overall performance and each NEO’s individual performance.
A further discussion of long-term equity-based incentive compensation awarded to NEOs is set forth below under the heading “2020 Long-Term Equity-Based Incentive Awards”.
Other Long-Term Incentives
In February 2020, in connection with succession planning following the late 2019 departure of Redwood’s then-Principal Accounting Officer, Redwood entered into a letter agreement with its CFO providing for a cash award to incentivize continued service, with payment of the award generally subject to continued service through March 1, 2022.
Standard Benefits
NEOs are provided with other benefits that are available to all eligible employees of Redwood on a substantially similar basis. These benefits, which are further described below on pages 63-64 within this CD&A, include standard health and welfare benefits and the ability to participate in Redwood’s tax-qualified 401(k) plan and Employee Stock Purchase Plan. In addition, NEOs may participate in Redwood’s Executive Deferred Compensation Plan.
Process for Compensation Determinations for 2020
Each year the Committee makes determinations regarding the compensation of Redwood’s NEOs. The process is dynamic and the Committee has the authority to re-examine and adjust the compensation program or process to take into account changing circumstances throughout the year. As in prior years, during 2020 the Committee directly engaged and used the services of a nationally recognized compensation consultant, FW Cook, to assist it in determining the elements of compensation and providing benchmarking analyses. FW Cook reports directly to the Committee and acts as the Committee’s consultant regarding director and executive officer compensation-related matters. FW Cook is not retained by Redwood or its management in any other capacity and the Committee has the sole authority to establish and terminate the relationship with FW Cook. In addition, the Committee conducted an assessment of the independence of FW Cook and concluded that no conflict of interest currently exists or existed in 2020 that would result in FW Cook not being able to provide independent advice to the Committee.
On an annual basis, FW Cook reviews the compensation program for Redwood’s executive officers with the Committee and assesses the competitiveness of compensation levels and targets to determine whether it is aligned with
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Redwood’s compensation philosophy and is externally competitive. In addition, FW Cook assists the Committee in determining the form and structure of the elements of Redwood’s executive compensation program. FW Cook also provides the Committee with data regarding compensation practices among the compensation benchmarking peer group. FW Cook’s analysis covers all elements of direct compensation, including base salary, annual incentives, and long-term incentives. Benefit and perquisite offerings at Redwood are also reviewed, as is Redwood equity ownership by each NEO. FW Cook’s analysis assists the Committee in understanding the extent to which different elements of each NEO’s compensation are above or below market levels and in understanding the year-to-year changes in awarded, accumulated, and potential NEO compensation. FW Cook also provided assistance, analysis and advice to the Committee in connection with the determinations made at its August 5, 2020 meeting – in particular, with respect to reducing each NEOs’ 2020 target bonus opportunity and providing the Mid-2020 LTI Awards to certain NEOs.
As part of its year-end process for making compensation determinations for NEOs, in December 2020, the Committee also considered the following:
The NEO’s collective self-assessment of their individual contributions and performance over the year;
Mr. Abate’s recommendations with respect to the compensation of Mr. Robinson;
Mr. Abate’s and Mr. Robinson’s recommendations with respect to the compensation of the other NEOs; and
FW Cook’s directional recommendations regarding the elements of compensation for each of the CEO and President, and its opinion on the recommendations developed by the CEO and President for the other NEOs. These recommendations and opinions were based on peer comparisons, other supplemental benchmarking data, and Redwood’s compensation philosophy.
Compensation Benchmarking for 2020
As in prior years, in 2020 the Committee asked FW Cook to conduct a market pay analysis with respect to the compensation of Redwood’s NEOs. FW Cook’s market pay analysis relied on publicly disclosed executive compensation data from the compensation benchmarking peer group, as well as supplemental data provided to FW Cook by Aon plc (formerly referred to as McLagan). The supplemental data was obtained because not all of the compensation benchmarking peer group companies publicly disclose information for officers with responsibilities comparable to Redwood’s NEOs. In addition, the supplemental data provided insight into executive compensation practices at competitors that are externally managed and, therefore, do not generally disclose comprehensive compensation data for their named executive officers, as well as private companies and divisions of larger public companies for which individual compensation data are not publicly disclosed. Many publicly-traded REITs that Redwood competes with for mortgage-industry talent are externally managed and do not disclose comprehensive executive compensation information.
The supplemental data provided by Aon was reviewed and analyzed by FW Cook, who advised the Committee that the information could reasonably be relied upon for its intended purpose. Aon and its affiliates also provide Redwood with compensation-related data and consulting services, including compensation benchmarking data for employees below the NEO level, as well as limited other services, including advisory services related to Redwood’s captive insurance company subsidiary.
The Committee considers the use of a market-based compensation analysis important for validating competitive positioning in attracting and retaining executive talent. Each year, as part of the competitive pay analysis, the Committee, after consultation with FW Cook, designates a compensation benchmarking peer group using a pre-defined process and objective industry and size criteria that is intended to include companies with which Redwood competes for business or for executive talent. The process and objective criteria used to select the 2020 compensation benchmarking peer group, which was carried out prior to the pandemic- and liquidity-related market disruptions, with final approval by the Committee at its March 2020 meeting, is detailed below.

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Step 1:
Begin with a broad screening process intended to identify publicly traded, U.S.-based companies that are internally managed (externally-managed companies generally have not disclosed comprehensive compensation data and are therefore excluded)
Step 2:Identify REITs and other companies most similar to Redwood (i.e., direct peers), including:
• Mortgage REITs, which are considered “direct peers” along with real estate development and financial services companies with a focus on mortgage servicing or mortgage-related assets
• Exclude all companies with market capitalization values outside of a 0.25 - 4.0x range compared to Redwood, subject to reasonable exceptions for key business competitors
Step 3:Identify other relevant business and labor-market competitors:
• Financial services companies with both market capitalization value and net income in a 0.5 - 2.0x range compared to Redwood
• Remove bank holding companies and companies in the cash advance/pawn broker businesses, due to fundamental differences in the underlying business model
Step 4:Select 15 to 25 companies for inclusion in the compensation benchmarking peer group:
• Include all companies identified in Step 2
• Include companies identified in Step 3 if they: (1) are included in the prior year’s compensation benchmarking peer group or (2) have been identified as a peer of Redwood’s most-direct peers (e.g., a peer of another mortgage REIT identified in Step 2)
• Add additional companies identified in Step 3 to: (1) ensure that the sample size is sufficient and (2) position Redwood closer to the median on key size measures, focusing primarily on market capitalization and net income and secondarily on revenue and total assets

The Committee recognizes that the compensation benchmarking peer group does not include generally higher-paying externally-managed REITs, mortgage-focused divisions of large publicly-traded financial institutions, private equity firms, and hedge funds with which Redwood competes for executive talent. These organizations are not included because they have different business economics and pay models from Redwood, and because comprehensive compensation data for their executives are generally not publicly available.
The Committee reviews the compensation benchmarking peer group and the selection process and criteria on an annual basis to confirm that they continue to reflect relevant business and labor market competitors for whom comprehensive data is available. Accordingly, the companies included as peers may change from year to year as a result of updates to the selection process and criteria and changes in the real estate and capital markets.
2020 Compensation Benchmarking Peer Group. Based on the above-described methodology, the compensation benchmarking peer group designated by the Committee in March 2020 for use in the competitive pay analysis prepared by FW Cook consisted of the following 16 companies:

AllianceBernstein Holding L.P.Arbor Realty Trust, Inc.
Capstead Mortgage CorporationChimera Investment Corporation
Cohen & Steers, Inc.Essent Group Ltd
Federated Investors, Inc.Hannon Armstrong Sustainable Infrastructure Capital, Inc
• iStar Financial Inc.Ladder Capital Corp.
Main Street Capital CorporationMFA Financial, Inc.
New York Mortgage Trust, Inc.NMI Holdings, Inc.
PennyMac Financial Services, Inc.Stifel Financial Corp.

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Changes to Compensation Benchmarking Peer Group. As noted above, the companies included in the benchmarking peer group may change from year to year. The following were changes made to Redwood’s compensation benchmarking peer group from 2019 to 2020:
Dynex Capital, Inc., was removed as it fell outside of the defined ranges for market capitalization value and net income at the time the benchmarking peer analysis process was carried out in early 2020.

2020 Base Salaries
Base salary is a traditional element of executive compensation. The Committee annually establishes base salaries for NEOs after reviewing the market data for similar executives, as well as the experience, skills, and responsibilities of each NEO. The Committee may adjust salaries at other times throughout the year, including at the time of a promotion.
In December 2019, after consultation with FW Cook, the Committee made determinations with respect to 2020 NEO base salaries as follows:
Mr. Abate. The 2020 base salary for Mr. Abate, Redwood’s Chief Executive Officer, would be increased from $750,000 to $800,000 per annum.
In May 2020, Mr. Abate voluntarily waived receipt of this base salary increase for the remainder of 2020.
Mr. Robinson. The 2020 base salary for Mr. Robinson, Redwood’s President, would be increased from $600,000 to $700,000 per annum.
Mr. Stone. The 2020 base salary for Mr. Stone, Redwood’s Executive Vice President and Chief Legal Officer, would be increased from $400,000 to $420,000 per annum.
Ms. Macomber. The 2020 base salary for Ms. Macomber, Redwood’s Chief Human Resource Officer, would be increased from $300,000 to $350,000 per annum.
Mr. Cochrane. The 2020 base salary for Mr. Cochrane, Redwood’s Chief Financial Officer, would be increased from $375,000 to $385,000 per annum.
Mr. Stern. The 2020 base salary for Mr. Stern, Redwood’s Managing Director – Portfolio Strategy and Risk, would be increased from $425,000 to $435,000 per annum.

2020 Performance-Based Annual Bonus Compensation
Redwood’s annual bonus program is designed to reward NEOs based on Redwood’s financial performance and each NEO’s individual performance.
Components of 2020 Target Annual Bonuses – As Structured at the Outset of 2020. In order to align the interests of NEOs with the interests of Redwood’s stockholders, the Committee determined prior to the first quarter of 2020, after consultation with FW Cook, that 2020 target annual bonuses for NEOs would be weighted as follows:
75% on the achievement of a predetermined target level of a company financial performance metric; and
25% on the achievement of pre-established individual goals relating to strategic, operational, sustainability and risk management objectives.
The weightings described above are consistent with the Committee’s historical practice and were selected so that most of an NEO’s 2020 target annual bonus would depend directly on company financial performance, while also providing incentives for achievement of individual strategic, operational, sustainability, and risk management goals that the Committee believes are in the interests of Redwood and its stockholders, but in some cases may be difficult to quantitatively link to company financial performance.
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Additionally, the Committee determined prior to the end of the first quarter of 2020 that individual performance in 2020 for each NEO would be reviewed in the context of, among other things, specific pre-determined goals and factors. As in past years, during 2020 these individual factors and goals were subject to adjustment when circumstances warranted, at the discretion of the Committee. For 2020, as in past years, the individual performance component of annual bonuses could be earned up to 200% of the target amount depending on the Committee’s assessment of individual performance.
The Committee also determined that the maximum annual bonus opportunity (i.e., the maximum sum of the two components of the annual bonus) in 2020 would continue to be $5 million for each of Mr. Abate and Mr. Robinson, and $3 million for each of the other NEOs. These maximum amounts were determined after consultation with FW Cook, and were considered appropriate based on each NEO’s position, responsibilities, required level of performance to reach the maximum, and competitive considerations.
Financial Performance Metric for 2020 Annual Bonuses – As Structured at the Outset of 2020. Prior to the first quarter of 2020, after a review of Redwood’s compensation program, and following consultation with FW Cook, the Committee determined to continue to use in 2020 the same financial metric to underlie the company performance bonus that was used in 2019 and prior years – namely, Adjusted ROE. Adjusted ROE is a non-GAAP financial performance measure that reflects GAAP earnings on average equity capital adjusted to exclude certain unrealized mark-to-market gains and losses from equity. Because Adjusted ROE is a ratio of earnings to equity capital, the adjustment to exclude these unrealized mark-to-market gains and losses is made to enable the calculation of an “apples-to-apples” non-GAAP ratio of earnings to equity capital for purposes of evaluating financial performance.
Each year the Committee follows a pre-established process for determining an Adjusted ROE financial performance target for that year. This target level of annual financial performance is established by the Committee prior to the end of the first quarter of the year and, if obtained at year-end, results in the company performance component of the annual bonus being paid at the target amount for that component of annual bonus. In 2020, as described above under the heading “Elements of Compensation in 2020 – Annual Cash Compensation – Base Salary and Bonus,” the Committee did not establish an Adjusted ROE target for 2020, due to the fact that there were substantial pandemic- and liquidity-related disruptions in financial markets occurring at the time the Committee was scheduled to do so on March 18, 2020. As is also described above, subsequently, in August 2020, the Committee determined to eliminate the ability of executive officers to earn a company performance component of their 2020 target annual bonuses.
Updated Structure of 2020 Annual Bonuses – As Determined in August 2020. As described above under the heading “Elements of Compensation in 2020 – Annual Cash Compensation – Base Salary and Bonus,” at a meeting on August 5, 2020, the Committee made the following determinations with respect to updating the structure of 2020 annual bonuses for NEOs:
Eliminate the ability of executive officers to earn a company performance component of their 2020 annual bonuses; and
Continue to provide each executive officer with an opportunity to earn an individual performance component of his or her 2020 annual bonus based on a year-end review of his or her individual contribution to Redwood’s updated 2020 company goals related to recovering from the impact of the pandemic and positioning Redwood for future growth.
In connection with the August 2020 update to the structure of the NEOs’ 2020 annual bonuses, the Committee determined to continue its practice that the individual performance component of annual bonuses could be earned up to two times the target amount for that component depending on the Committee’s assessment of individual performance.
NEOs’ 2020 Target Annual Bonus Amounts – As Structured at the Outset of 2020. At the end of 2019, the Committee made determinations with respect to each NEO’s target 2020 annual bonus, after consultation with FW Cook and consideration of market-based benchmarks for the position, competitive factors and the NEO’s role, experience, and performance at Redwood.
Mr. Abate. In December 2019, the Committee determined that the 2020 target bonus percentage for Mr. Abate would be increased from 175% to 185% of base salary for 2020.
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Mr. Robinson. In December 2019, the Committee determined that the 2020 target bonus percentage for Mr. Robinson would be increased from 165% to 175% of base salary for 2020.
Mr. Stone. In December 2019, the Committee determined that the 2020 target bonus percentage for Mr. Stone would be increased from 120% to 125% of base salary for 2020.
Ms. Macomber. In December 2019, the Committee determined that the 2020 target bonus percentage for Ms. Macomber would remain at 100% of base salary for 2020.
Mr. Cochrane. In December 2019, the Committee determined that the 2020 target bonus percentage for Mr. Cochrane would remain at 125% of base salary for 2020.
Mr. Stern. In December 2019, the Committee determined that the 2020 target bonus percentage for Mr. Stern would remain at 135% of base salary for 2020.
NEOs’ 2020 Target Annual Bonus Amounts – As Structured at the Outset of 2020 and as Updated in August 2020. The table below sets forth the 2020 target annual bonuses that were established for each NEO at the outset of 2020, and the update to those target amounts based on the Committee’s determinations in August 2020.

At the Outset of 2020
As Updated in August 2020
NEO
2020 Target Annual Bonus
(as % of Base Salary)
2020 Target Annual Bonus ($)2020 Target Annual Bonus (as % of Base Salary)2020 Target Annual Bonus ($)
Reduction in 2020 Target Annual Bonus Due to Update
Mr. Abate, Chief Executive Officer
185%
$
1,480,000
61.7%
$ 493,333
-66 2/3%
Mr. Robinson, President
175%
$
1,225,000
58.3%
$ 408,333
-66 2/3%
Mr. Stone, Executive Vice President and Chief Legal Officer
125%
$
525,000
41.7%
$ 175,000
-66 2/3%
Ms. Macomber,
Chief Human Resource Officer
100%
$
350,000
33.3%
$ 116,667
-66 2/3%
Mr. Cochrane, Chief Financial Officer
125%
$
481,250
41.7%
$ 160,417
-66 2/3%
Mr. Stern, Managing Director – Portfolio Strategy and Risk
135%
$
587,250
45.0%
$ 195,731
-66 2/3%

Form of Payment of 2020 Performance-Based Annual Bonuses. In December 2019 the Committee decided, after consultation with FW Cook, to continue an existing practice that results in a portion of annual bonuses not being paid fully in cash in certain above-target performance circumstances. In particular, for 2020 with respect to each of the NEOs, if the performance-based annual bonuses earned by an NEO for 2020 exceeded two times the 2020 target annual bonus opportunity designated for that NEO, the excess portion would be paid 50% in cash and 50% in the form of vested DSUs with a mandatory three-year holding period. Under this formula, as an NEO’s annual bonus increases above 200% of target, an increasingly smaller percentage of that bonus is paid in cash. Payment of annual bonus amounts in this manner invests a greater portion of the NEOs’ annual bonuses in Redwood’s future financial performance, which the Committee believes supports the alignment of executive and long-term stockholder interests.


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Performance-Based Annual Bonuses Earned for 2020
As described above, annual performance-based bonuses earned by NEOs for 2020 consisted solely of the individual performance component. As noted above within “Elements of Compensation in 2020–Annual Cash Compensation – Base Salary and Bonus,” in August 2020 the Committee both (i) eliminated the ability of NEOs to earn a company performance component of their 2020 target annual bonuses and (ii) continued to provide each NEO with an opportunity to earn a portion of his or her 2020 target annual bonuses based on a year-end review of his or her individual contribution to achieving Redwood’s updated 2020 company goals related to recovering from the impacts of the pandemic and positioning Redwood for future growth.
Individual Performance Components of 2020 Annual Bonuses. At the end of 2020, the Committee reviewed the individual performance of each of the NEOs, the NEOs’ collective self-assessment of their individual contributions and the assessment by Mr. Abate of Mr. Robinson, and the assessment by Mr. Abate and Mr. Robinson of the other NEOs. In assessing each NEO’s individual performance for 2020, the Committee considered the NEO’s contribution to recovering from the impact of the pandemic and to the achievement of 2020 company goals (summarized below), as updated in mid-2020 to support Redwood’s necessary strategic repositioning. With respect to each of these goals, the Committee took into account each NEO’s contribution and the related level of attainment (presented in italics after each listed goal below). The Committee did not assign specific weightings to each factor and goal, but instead considered them together as part of a comprehensive qualitative review.
Goal: In connection with Redwood’s necessary strategic repositioning: establish an updated framework for working capital levels and financial risk limits for Redwood’s operating platforms; strategically and opportunistically deploy available capital, including through debt and stock repurchases and other strategic investments; increase dividend in line with sustainable income growth; and continue to manage Redwood’s capital position to avoid the need for a dilutive capital raise.
The Committee evaluated achievement of this goal in the context of various factors, including that during the second half of 2020: working capital and risk limits were updated for each of Redwood’s operating platforms, taking into account various factors, including marginable versus non-marginable warehouse financing facilities, financing capacity for loans in forbearance, interest rate hedging strategy, and appropriate levels of contingent liquidity; a significant amount of available capital was deployed into assets created through Redwood’s operating platforms, as well as through accretive repurchases of common stock and convertible debt; strategic investments by RWT Horizons were initiated; Redwood increased its quarterly dividend to $0.14 per share for both the third and fourth quarters; and Redwood completed 2020 with sufficient available capital to continue to pursue strategic and opportunistic investment opportunities without needing to raise dilutive capital.
Goal: Reposition Redwood’s Residential Mortgage Banking platform by: re-growing profitable residential loan purchase volumes within updated risk and working capital limits; maintaining a diversified distribution strategy for the sale and securitization of loans; replacing human resources that voluntarily departed (including through external hiring and acceleration of the in-place succession planning process); developing, within timeline and budget, in-process and new platform technology initiatives; and fortifying the platform’s financing facilities against potential future financing market disruptions.
The Committee evaluated achievement of this goal in the context of various factors, including that during the second half of 2020 Redwood: saw residential loan purchase and sale activity rebound significantly as a result of its repositioning efforts, with loan purchases from over 90 different sellers and with a healthy mix of loan distribution between whole loan sales and securitization; successfully upgraded its residential mortgage banking leadership and workforce through acceleration of succession plans and external recruiting; launched its accelerated funding initiative, Rapid Funding, in the fourth quarter and reached important milestones towards completing additional technology and automation initiatives that should facilitate higher volumes of future business and more real-time and automated transparency into surveillance and analysis of portfolio assets; and increased financing capacity for loan inventory, including through the use of non-marginable warehouse capacity and facilities that provide designated financing capacity for loans in forbearance.

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Goal: Enhance Redwood’s Business Purpose Lending platform by: increasing business purpose mortgage loan originations within updated risk and working capital limits; refining Redwood’s strategy for bridge loan originations; remaining on schedule and within budget for key platform technology initiatives; updating financing facilities to increase use of non-marginable facilities; and developing alternative distribution channels for the disposition of loans.
The Committee evaluated achievement of this goal in the context of various factors, including that during the second half of 2020 Redwood: established a comprehensive strategic plan for growing its bridge lending business with a focus on product differentiation and customer engagement; increased capital allocated to support this growth, while also reducing financial risk by restructuring financing facilities to increasingly utilize non-marginable and non-recourse financing; significantly increased business purpose loan originations in the second half of 2020 in accordance with plan; completed in-process technology initiatives, including initiatives related to the combination of acquired origination platforms; and executed traditional and innovative securitization distribution transactions for the sale of single-family rental loans.
Goal: Engage workforce in embracing the “new normal” of remote working by updating the tools and techniques for communication and collaboration; continue to strengthen Redwood’s workplace culture and provide employees with career development opportunities; and progress Redwood’s diversity, inclusion, equity and belonging initiatives.
The Committee evaluated achievement of this goal in the context of various factors, including that during the second half of 2020 Redwood: was highly effective in shifting its workforce to a remote working model, as it significantly evolved back-end infrastructure and front-end engagement tools to support its workforce during the pandemic; continued recruiting, onboarding, and performance management through remote systems and processes; maintained its leadership development capabilities across the organization with adapted remote learning modalities; redesigned core programs across the employee lifecycle for a remote and hybrid workforce, ensuring varied and frequent communication with employees; evolved policies to create flexibility and accountability for where and how employees work during the pandemic; and ensured safe and compliant office workspaces for a limited non-remote staff by implementing updated practices for office operations, addressing a variety of different state and local requirements and business needs, while also engaging with the workforce to maintain safety and address employee concerns.
Based on its review, the Committee determined the individual performance components of annual bonuses for each NEO for 2020 would equal two times their updated target amount for this component, as set forth in the table below under the heading “Total 2020 Annual Bonuses”.
Total 2020 Annual Bonuses. Because the Committee had eliminated the ability of NEOs to earn a company performance component of their 2020 annual bonuses, the individual performance components reported in the table below also represent the total 2020 annual bonuses for each NEO. The NEOs 2020 annual bonuses were generally significantly lower than their 2019 annual bonuses. For example, the CEO’s 2020 annual bonus was 56% lower than his 2019 annual bonus.
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NEO
2020 Target Annual Bonus
(At the Outset of 2020)
($)
2020 Individual Performance Component Awarded (Total 2020 Annual Bonus Earned) ($)
Mr. Abate, Chief Executive Officer
$
1,480,000
$
986,667
Mr. Robinson, President
$
1,225,000
$
816,667
Mr. Stone, Executive Vice President and Chief Legal Officer
$
525,000
$
350,000
Ms. Macomber, Chief Human Resource Officer
$
350,000
$
233,334
Mr. Cochrane, Chief Financial Officer
$
481,250
$
320,834
Mr. Stern, Managing Director – Portfolio Strategy and Risk
$
587,250
$
391,461
Grant of Mid-2020 Long-Term Incentive Awards and Other Long-Term Incentives

As described above under the heading “Elements of Compensation in 2020 – Mid-Year 2020 Long-Term Incentives”, in August 2020, in connection with Redwood’s necessary strategic repositioning, the Committee determined to provide mid-2020 long-term incentive awards to certain NEOs in order to incentivize future outperformance on a relative TSR basis, while also providing a basic long-term retention incentive. These long-term incentives were awarded on August 5, 2020 through grants of Long-Term Relative TSR Performance Vesting Cash Awards and Three-Year Vesting Cash Awards. These long-term incentive awards utilize a cash settlement structure intended to limit potential dilution to shareholders.

Mid-2020 LTI Awards. Each of the NEOs listed in the table below received a Long-Term Relative TSR Performance Vesting Cash Award and a Three-Year Vesting Cash Award, the key terms of which are summarized below.
The Long-Term Relative TSR Performance Vesting Cash Awards are performance-based awards under which the amount of value that vests, and that the recipient becomes entitled to receive, following continued service through the vesting period, will range from 0% to 400% of the granted award value based on Redwood’s relative total stockholder return (“rTSR”) over the three-year performance measurement period compared to the component companies of the S&P 600 Small Cap Financials Index. No value vests or is earned for relative TSR performance below the 60th percentile.
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Relative TSR (X)
Percentage of
Granted Award Value that Vests
X < 60th percentile
0%
60th percentile ≤ X < 65th percentile
80%
65th percentile ≤ X < 70th percentile
120%
70th percentile ≤ X < 75th percentile
160%
75th percentile ≤ X < 80th percentile
200%
80th percentile ≤ X < 85th percentile
240%
85th percentile ≤ X < 90th percentile
280%
90th percentile ≤ X < 95th percentile
320%
95th percentile ≤ X < 100th percentile
360%
X = 100th percentile
400%

The Three-Year Vesting Cash Awards vest over three years based on continued service and the vesting schedule for each recipient is set forth in the table below. For Mr. Abate, Mr. Robinson and Mr. Stone, 25% of the Three-Year Vesting Cash Award will vest on the first anniversary of the grant date and 75% will vest on the third anniversary of the grant date. For Ms. Macomber and Mr. Stern, 33.3% of the Three-Year Vesting Cash Award will vest on each of the first, second and third anniversaries of the grant date.

Granted Award Values
NEO
Three-Year Vesting
Cash Award ($)(1)
Long-Term Relative TSR Performance Vesting Cash Award ($)(2)
Mr. Abate, Chief Executive Officer
$
1,000,000
$
750,000
Mr. Robinson, President
$
825,000
$
618,800
Mr. Stone, Executive Vice President and Chief Legal Officer
$
355,000
$
266,250
Ms. Macomber,
Chief Human Resource Officer
$
250,000
$
83,300
Mr. Stern, Managing Director – Portfolio Strategy and Risk
$
400,000
$
133,300
(1) For Mr. Abate, Mr. Robinson and Mr. Stone, 25% of the Three-Year Vesting Cash Award will vest on the first anniversary of the grant date and 75% will vest on the third anniversary of the grant date. For Ms. Macomber and Mr. Stern, 33.3% of the Three-Year Vesting Cash Award will vest on each of the first, second and third anniversaries of the grant date.
(2) As described above, between 0% and 400% of the granted award value of Long-Term Relative TSR Performance Vesting Cash Awards will vest at the third anniversary of the grant date based on three-year relative TSR.
The terms of the Long-Term Relative TSR Performance Vesting Cash Awards and the Three-Year Vesting Cash Awards granted in August 2020 are established under definitive award agreements, with terms that include provisions relating to forfeiture, retirement, and change-in-control.

Other Long-Term Incentives. In late 2019, Redwood disclosed the departure of its Principal Accounting Officer. Following that departure, in connection with succession planning, Mr. Cochrane, Redwood’s CFO, agreed to also serve as Redwood’s Principal Accounting Officer. In connection with this additional role and the related responsibilities, Redwood entered into a letter agreement with Mr. Cochrane in February 2020 providing for a $500,000 cash award to incentivize continued service, with payment of the award generally subject to continued service over a two-year period
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– i.e., through March 1, 2022. As noted above, because he had received this long-term incentive award in February 2020, Mr. Cochrane did not receive a Mid-2020 LTI Award.

2020 Long-Term Equity-Based Incentive Awards

Equity ownership in Redwood provides an important linkage between the interests of stockholders and executives by rewarding long-term stockholder value creation. To meet this objective, officers, directors, key employees, and other persons expected to contribute to Redwood’s management, growth, and profitability are eligible to receive long-term equity-based incentive awards. The Committee oversees the issuance of these awards to NEOs and in consultation with FW Cook, determines the types and sizes of awards granted based on the NEO’s position, responsibilities, total compensation level, individual and company financial performance, competitive factors, and market-based benchmarks.
The Committee’s normal practice is to make long-term equity-based incentive awards to NEOs at the regularly scheduled (pre-established) fourth quarter meeting of the Committee. Accordingly, on December 16, 2020, the Committee made 2020 year-end long-term equity-based incentive awards to NEOs in three forms: DSUs, csDSUs and PSUs, the key terms of which are summarized below.
The DSUs granted on December 16, 2020 will vest over four years, with 25% vesting on January 31, 2022, and an additional 6.25% vesting on the last day of each subsequent quarter (beginning with the quarter ending March 31, 2022), with full vesting occurring on December 15, 2024. Shares of Redwood common stock underlying these DSUs will be distributed to the recipients not earlier than December 15, 2024, unless electively deferred under the terms of Redwood’s Executive Deferred Compensation Plan. The number of DSUs granted to each NEO was determined as a specified dollar amount, divided by the closing price of Redwood’s common stock on the grant date.
The terms of the csDSUs granted on December 16, 2020 are generally consistent with the terms of the DSUs noted above, except that at settlement (four years following the grant), the value of the common stock referenced by the csDSUs on December 15, 2024 will be settled with a cash payment, rather than through the delivery of shares of common stock. The csDSUs granted on December 16, 2020 will vest over four years, with 25% vesting on January 31, 2022, and an additional 6.25% vesting on the last day of each subsequent quarter (beginning with the quarter ending March 31, 2022), with full vesting occurring on December 15, 2024. The number of csDSUs granted to each NEO was determined as a targeted dollar amount, divided by the closing price of Redwood’s common stock on the grant date.
The use of csDSUs was introduced in 2020 in order to, among other things, reduce the potential for dilution to stockholders from long-term equity-based incentive awards.
The PSUs granted on December 16, 2020 are performance-based equity awards which provide for vesting to generally range from 0% to 250% of the target number of PSUs granted, with the target number of PSUs adjusted to reflect the value of any dividends declared on Redwood common stock during the vesting period (as further described below). Vesting of these PSUs will generally occur based on the performance metrics described below during a three-year measurement period and continued employment through January 1, 2024. Further detail on performance-based vesting of the PSUs granted in December 2020 is set forth below.

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Performance-Based Vesting – PSUs Granted in December 2020. Performance-based vesting of the PSUs granted in December 2020 will generally occur as of January 1, 2024, after a three-year performance measurement period, based on a three-step process as described below.
First, the target number of PSUs granted (“Target PSUs”) are divided into three equal tranches of Target PSUs, with one tranche corresponding with each of calendar years 2021, 2022, and 2023. Baseline vesting for each tranche will range from 0% to 200% of the corresponding Target PSUs based on the level of Redwood’s bvTSR over the corresponding calendar-year, with 100% of the Target PSUs in each tranche vesting if bvTSR for the applicable calendar year is 7.7%, which, at target level vesting, equates to a cumulative three-year bvTSR of 25%.
Baseline vesting for each tranche of PSUs for the corresponding annual period will be in accordance with the following table:
Annual Book Value TSR (“bvTSR”):
Equivalent Cumulative bvTSR Over Three-Year Period:*
% of Performance-Based Vesting:**
Less than 1.6% bvTSR
Less than 5% bvTSR
0%
1.6% bvTSR
5% bvTSR
50%
7.7% bvTSR
25% bvTSR
100%
13.2% or greater bvTSR
45% or greater bvTSR
200%
*Equivalent cumulative bvTSR over three-year period is illustrative of annual bvTSR compounded over a three-year period.
**
If actual bvTSR is between two of the performance thresholds set forth in this table, the percentage of baseline vesting shall be determined based on a straight-line, mathematical interpolation between the applicable performance-based vesting percentages.
bvTSR, for the PSUs granted in December 2020 is defined as the percentage by which Redwood’s GAAP book value per share (after reversing the net impact of specified acquisition-related accounting items) has increased or decreased as of the last day of the three-year performance measurement period relative to the first day of such period, plus the value of cash dividends declared and/or paid during such period on Redwood common stock.
Second, at the end of the three-year vesting period, the aggregate vesting level of the three tranches, or the total baseline vesting, would then be increased or decreased by up to 50 percentage points based on Redwood’s three-year rTSR compared to the component companies of the FTSE Nareit Mortgage REIT Index, with median rTSR performance correlating to no adjustment from the total baseline level of vesting.
Adjustments to total baseline vesting of PSUs based on three-year rTSR will be in accordance with the following table:
Three-Year
Relative TSR (“rTSR”):
Relative TSR Adjustment to Total Baseline Vesting:*
25th percentile or less
Minus 50 percentage points
50th percentile
No change
75th percentile or greater
Plus 50 percentage points
* If actual relative TSR is between two of the performance thresholds set forth in this table, the adjustment to baseline vesting shall be determined based on a straight-line, mathematical interpolation between the applicable percentage point adjustments.

Third, if the aggregate vesting level after steps one and two is greater than 100% of the Target PSUs, but Redwood’s absolute total shareholder return (“TSR”) is negative over the three-year performance period, vesting would be capped at 100% of Target PSUs.
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Absolute TSR is defined as the percentage by which the per share price of Redwood’s common stock has increased or decreased as of the last day of the three-year performance measurement period relative to the first day of such period, adjusted to reflect the reinvestment of all dividends declared and/or paid during such period on Redwood common stock.
Vested shares of Redwood common stock underlying these PSUs, if any, will be distributed to the recipients not later than 45 days following April 1, 2024, unless electively deferred under the terms of Redwood’s Executive Deferred Compensation Plan. Prior to vesting, no dividend equivalent rights are paid in respect of PSUs.
At the time of vesting, the value of any dividends paid during the vesting period will be reflected in the PSUs by increasing the target number of PSUs granted by an amount corresponding to the incremental number of shares of Redwood common stock that a stockholder would have acquired between the grant date and the end of the three-year performance measurement period, had all dividends during that period been reinvested in Redwood common stock on the applicable dividend payment dates.
After the vesting of any of these PSUs on January 1, 2024, and until the delivery of the underlying shares of Redwood common stock, the underlying vested award shares will have attached dividend equivalent rights, resulting in the payment of dividend equivalents each time Redwood pays a common stock dividend.
DSUs Granted to Ms. Macomber in March 2020. As noted above, the Committee’s normal practice is to make long-term equity-based incentive awards to NEOs at the regularly scheduled (pre-established) fourth quarter meeting of the Committee. With respect to Ms. Macomber, the process for benchmarking and determining her 2019 year-end long-term equity-based award was ongoing at the end of 2019, with the result that a portion of Ms. Macomber’s 2019 year-end long-term equity-based award was provided in the form of a grant of DSUs on March 2, 2020, the date that 2019 year-end equity-based awards were granted to non-executive level employees. The DSUs granted to Ms. Macomber on March 2, 2020 will vest over four years, with 25% vesting on April 1, 2021, and an additional 6.25% vesting on the last day of each subsequent three-month period (beginning with the three-month period ending July 1, 2021), with full vesting occurring on March 1, 2024. Shares of Redwood common stock underlying these DSUs will be distributed to Ms. Macomber not earlier than March 1, 2024, unless electively deferred under the terms of Redwood’s Executive Deferred Compensation Plan. The number of DSUs granted to Ms. Macomber on March 2, 2020 was determined as a specified dollar amount, divided by the closing price of Redwood’s common stock on the grant date. This March 2, 2020 DSU award for Ms. Macomber is separately noted in the table the follows below, as it was granted in 2020, but was part of, and related to, the 2019 year-end compensation process.
Equity-Based Award Agreements. The terms of the DSUs, csDSUs and PSUs granted in March 2020 and December 2020 are established under a DSU award agreement, a csDSU award agreement, or a PSU award agreement, as applicable, and Redwood’s 2014 Incentive Plan. These terms include provisions relating to dividend equivalent rights, forfeiture, retirement, mandatory net settlement for income tax withholding purposes, and change-in-control.
NEOs’ 2020 Year-End Long-Term Equity-Based Incentive Award Values. The Committee made the following determinations with respect to the value of each NEO’s 2020 year-end long-term equity-based incentive awards after consultation with FW Cook, a review of market-based benchmarks for the position and consideration of competitive factors, and the NEO’s role, experience, and performance at Redwood.
Mr. Abate. In December 2020, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Abate would total $3.75 million, with this award value granted as: $937,500 in DSUs (25% of total value), $937,500 in csDSUs (25% of total value), and $1.875 million in PSUs (50% of total value).
The aggregate grant date fair value of Mr. Abate’s 2020 year-end, long-term equity-based incentive awards was unchanged from the aggregate grant date fair value of his year-end 2019 awards.
Mr. Robinson. In December 2020, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Robinson would total $2.5 million, with this
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award value granted as: $625,000 in DSUs (25% of total value), $625,000 in csDSUs (25% of total value), and $1.25 million in PSUs (50% of total value).
The aggregate grant date fair value of Mr. Robinson’s 2020 year-end, long-term equity-based incentive awards was decreased by 29% from the aggregate grant date fair value of his year-end 2019 awards.
Mr. Stone. In December 2020, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Stone would total $1.05 million, with this award value granted as: $262,500 in DSUs (25% of total value), $262,500 in csDSUs (25% of total value), and $525,000 in PSUs (50% of total value).
The aggregate grant date fair value of Mr. Stone’s 2020 year-end, long-term equity-based incentive awards was unchanged from the aggregate grant date fair value of his year-end 2019 awards.
Ms. Macomber. In December 2020, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Macomber would total $800,000, with this award value granted as: $200,000 in DSUs (25% of total value), $200,000 in csDSUs (25% of total value), and $400,000 in PSUs (50% of total value).
The aggregate grant date fair value of Ms. Macomber’s 2020 year-end, long-term equity-based incentive awards was unchanged from the aggregate grant date fair value of her year-end 2019 awards, which were awarded in part in December 2019 and in part on March 2, 2020.
Mr. Cochrane. In December 2020, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Cochrane would total $775,000, with this award value granted as: $193,750 in DSUs (25% of total value), $193,750 in csDSUs (25% of total value), and $387,500 in PSUs (50% of total value).
The aggregate grant date fair value of Mr. Cochrane’s 2020 year-end, long-term equity-based incentive awards was decreased by 8.8% from the aggregate grant date fair value of his year-end 2019 awards.
Mr. Stern. In December 2020, the Committee determined that the aggregate grant date fair value of year-end, long-term equity-based incentive awards granted to Mr. Stern would total $1.0 million, with this award value granted as: $250,000 in DSUs (25% of total value), $250,000 in csDSUs (25% of total value), and $500,000 in PSUs (50% of total value).
The aggregate grant date fair value of Mr. Stern’s 2020 year-end, long-term equity-based incentive awards was increased by 11.1% from the aggregate grant date fair value of his year-end 2019 awards.
The number and grant date fair value of DSUs, csDSUs and PSUs comprising the 2020 year-end long-term equity-based awards granted to each NEO in December 2020 are set forth in the table below:
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Deferred Stock Units
(“DSUs”)(1)
Cash Settled Deferred
Stock Units
(“csDSUs”)(1)
Performance Stock Units
(“PSUs”)(1)
NEO
#
Aggregate Grant Date Fair Value
#
Aggregate Grant Date Fair Value
#
Aggregate Grant Date Fair Value
Mr. Abate,
Chief Executive Officer
106,898
$ 937,500
106,898
$ 937,500
179,942
$ 1,875,000
Mr. Robinson,
President
71,265
$ 625,000
71,265
$ 625,000
119,961
$ 1,250,000
Mr. Stone,
Executive Vice President and Chief Legal Officer
29,931
$ 262,500
29,931
$ 262,500
50,383
$ 525,000
Ms. Macomber,
Chief Human Resource Officer(2)
22,805
$ 200,000
22,805
$ 200,000
38,387
$ 400,000
Mr. Cochrane,
Chief Financial Officer
22,092
$ 193,750
22,092
$ 193,750
37,188
$ 387,500
Mr. Stern,
Managing Director – Portfolio Strategy and Risk
28,506
$ 250,000
28,506
$ 250,000
47,984
$ 500,000

(1) Grant date fair value determined at the time the grant was made in accordance with FASB Accounting Standards Codification Topic 718. The value of dividend equivalent rights associated with DSUs and csDSUs and the value of any increase in the target number of PSUs to reflect dividends paid during the performance period were taken into account in establishing the grant date fair value of these DSUs, csDSUs and PSUs under FASB Accounting Standards Codification Topic 718 at the time the awards were granted. Therefore, dividend equivalent right payments and any increase in the target number of PSUs to reflect dividends paid during the performance period are not considered part of the compensation or other amounts reported in the summary table of NEO compensation under “Executive Compensation Tables — Summary Compensation,” or reported below under “Executive Compensation Tables — Grants of Plan-Based Awards.”
(2) As noted above under the heading “DSUs Granted to Ms. Macomber in March 2020”, Ms. Macomber received a portion of her 2019 year-end long-term equity-based award on March 2, 2020 in the form of 16,997 DSUs with a four-year vesting schedule ending March 1, 2024; these DSUs, which had an aggregate grant date fair value of $300,000, are not included in the table above.

Vesting and Mandatory Holding Periods for 2020 Long-Term Equity-Based Incentive Awards
DSUs Granted in December 2020. The DSUs granted to NEOs in December 2020 have the four-year vesting schedule described above on page 57 within this CD&A under the heading “2020 Long-Term Equity-Based Incentive Awards.” Notwithstanding this vesting schedule, while continuously employed, the NEOs are subject to a mandatory four-year holding period with respect to these DSU awards, with the result that these DSU awards are not scheduled to be distributed to recipients in shares of Redwood common stock until four years following the respective grant dates (i.e., in December 2024).
csDSUs Granted in December 2020. The cash-settled DSUs (“csDSUs”) granted to NEOs in December 2020 have the four-year vesting schedule described above on page 57 within this CD&A under the heading “2020 Long-Term Equity-Based Incentive Awards.” Notwithstanding this vesting schedule, while continuously employed, the NEOs are subject to a mandatory four-year holding period with respect to these csDSU awards, with the result that these csDSU awards are not scheduled for settlement payments to recipients until four years following the respective grant dates (i.e., in December 2024).
PSUs Granted in December 2020. The PSUs granted to NEOs in December 2020 have the three-year vesting schedule described above on pages 57-58 within this CD&A under the heading “2020 Long-Term Equity-Based Incentive Awards.” For any of the PSUs that vest, they will be distributed to recipients in shares of Redwood common stock not later than 45 days following April 1, 2024.
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DSUs Granted in March 2020 to Ms. Macomber. The DSUs granted to Ms. Macomber on March 2, 2020 as part of her 2019 year-end long-term equity-based incentive award, have the four-year vesting schedule described above on page 59 within this CD&A under the heading “DSUs Granted to Ms. Macomber in March 2020.” Notwithstanding this vesting schedule, while continuously employed, Ms. Macomber is subject to a mandatory four-year holding period with respect to these DSU awards, with the result that these DSU awards are not scheduled to be distributed to her in shares of Redwood common stock until four years following the grant date (i.e., in March 2024).

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Section III - Other Compensation, Plans and Benefits
ØDeferred Compensation
ØEmployee Stock Purchase Plan
Ø401(k) Plan and Other Matching Contributions
ØOther Compensation and Benefits
ØSeverance and Change of Control Arrangements

Deferred Compensation
Under Redwood’s Executive Deferred Compensation Plan, NEOs (and other eligible officers of Redwood) may elect to defer up to 100% of their cash compensation as well as dividend equivalent right payments on DSUs, csDSUs and vested PSUs and, under certain circumstances, can also elect to re-defer scheduled distributions of cash or stock from the plan. Additionally, delivery of shares of Redwood common stock underlying DSUs and PSUs granted under Redwood’s 2014 Incentive Plan may be deferred under the Executive Deferred Compensation Plan. Deferred amounts may be deferred until a date chosen by the participant in the plan at the time of the initial deferral (subject to certain restrictions) or until separation from service, at which time the balance in the participant’s account will be delivered in cash or common stock (as applicable), or paid out over a period of up to 15 years, depending upon deferral elections.
Cash amounts deferred under the Executive Deferred Compensation Plan are credited with interest at 120% of the long-term applicable federal rate as published by the IRS, which does not constitute above-market interest under IRS regulations. As an example, for December 2020, 120% of the long-term applicable federal rate was approximately 1.56% per annum. Cash balances deferred under the Executive Deferred Compensation Plan remain available to Redwood for general corporate purposes pending the obligation to deliver the deferred amounts on the deferral date. The ability of participants to receive interest on deferred amounts is one incentive to participate in this Plan, and has the benefit of making the funds available for use by Redwood.
Redwood also matches 50% of cash compensation deferred by participants in the Executive Deferred Compensation Plan, provided that total matching payments and contributions made by Redwood to participants in the Executive Deferred Compensation Plan and Redwood’s 401(k) plan (discussed below) are limited to 6% of base salary. Participants are fully vested in all prior and all new matching payments after three years of employment. Redwood believes the Executive Deferred Compensation Plan provides a vehicle for executive officers and other participants to plan for retirement and supports tax planning flexibility.

Employee Stock Purchase Plan
Redwood offers all eligible employees (including NEOs) the opportunity to participate in a tax-qualified Employee Stock Purchase Plan (ESPP). Through payroll deductions, employees can purchase shares of Redwood’s common stock at a discount from fair market value on a quarterly basis. The purchase price per share is the lower of (a) 85% of the fair market value per share on the first day of each 12-month offering period (January 1st) and (b) 85% of the fair market value per share on the purchase date (the end of each calendar quarter, March 31st, June 30th, September 30th, and December 31st). An employee is eligible to participate in the ESPP at the beginning of the quarter following 90 consecutive days of employment. Employees are allowed to contribute up to 15% of their cash compensation, subject to a limit of $25,000 per offering period, which is equivalent to a calendar year.

401(k) Plan and Other Matching Contributions
During 2020, Redwood offered a tax-qualified 401(k) plan to all eligible employees (including NEOs) for retirement savings. Under this plan, during 2020, eligible employees, including NEOs, were allowed to contribute and invest up to 100% of their cash earnings, subject to the maximum 401(k) contribution amount under Federal law. Contributions can be invested in a diversified selection of mutual funds.
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In order to encourage participation and to provide a retirement planning benefit to employees, during 2020 Redwood also generally provided a matching contribution of up to 50% of employees’ 401(k) plan contributions, provided that matching contributions to the 401(k) plan were limited to the lesser of 4% of an employee’s cash compensation or $9,750. Employees who are provided with matching contributions are fully vested in all prior and all new matching contributions after three years of employment. As noted above, for 2020, total matching payments made to participants in the Executive Deferred Compensation Plan (taken together with matching contributions to the 401(k) plan) were limited to 6% of base salary.

Other Compensation and Benefits
During 2020, Redwood also provided employees (including NEOs) with certain other health and welfare benefits, generally consisting of: medical, dental, vision, disability, and life insurance, a disability income continuation program (which can supplement disability insurance payments), an employee assistance program (which is a standard package of assistance benefits such as counseling and legal and financial consultation and referral services), a fitness-related activity reimbursement program, and a flexible spending account program. The provision of these types of benefits is important in attracting and retaining employees. These plans were available in 2020 to all eligible employees on a substantially similar basis. During 2020, Redwood paid a portion of all employees’ monthly premium for medical and dental coverage, as well as for basic long-term disability and life insurance provided through Redwood plans.

Severance and Change of Control Arrangements
For NEOs and other Redwood employees, the terms of outstanding long-term incentive award agreements include “change of control” double-trigger protection that provide for the acceleration of outstanding awards in the event a termination without “cause” or a termination of employment with “good reason”, following a “change of control”.
In addition, certain of Redwood’s NEOs have entered into an employment agreement or a letter agreement with Redwood, which provide for severance payments and vesting of equity-related awards in the event Redwood terminates the executive’s employment without “cause” or, in certain cases, the executive terminates his or her employment for “good reason.” These employment agreements also provide for payments and vesting of equity-related awards in the event of the executive’s death or disability.
In the event of a “change of control,” these employment or letter agreements provide for vesting of long-term incentive awards only after a “double trigger” - meaning that no awards would vest unless the executive is terminated without “cause” or, in certain cases, terminates his or her employment with “good reason”, following such a “change of control”.
In addition, under these employment agreements if the surviving or acquiring corporation does not assume outstanding long-term incentive awards or substitute equivalent awards, then the long-term incentive awards will generally vest in full. These agreements were entered into in order to attract and retain these executives in the competitive marketplace for executive talent.
For all NEOs, under the award agreements governing outstanding PSUs and Long-Term Relative TSR Performance Vesting Cash Awards, in the event of a “change of control,” the per share price paid in connection with the change of control will be used to calculate TSR when determining the vesting of outstanding PSU awards. When applicable, absolute TSR performance goals will be annualized to reflect the number of days completed in the performance-measurement period (from the first day of the period through the closing date of the change of control).
The various levels of post-termination benefits for each of the NEOs were determined by the Committee to be appropriate based on that executive’s duties and responsibilities with Redwood and were the result of arm’s-length negotiations with these individuals. The different levels were also determined to be appropriate and reasonable when compared to post-termination benefits provided by Redwood’s peers to executives with similar titles and similar levels of responsibility. The levels of benefit were also intended to take into account the expected length of time and difficulty the executive may experience in trying to secure new employment. The amount of the severance is balanced against Redwood’s need to be responsible to its stockholders and also considers the potential impact the severance payments may have on other potential parties to a change in control transaction.
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The terms of the executive severance and change of control arrangements that were in place with NEOs during 2020 are described in more detail below under “Potential Payments upon Termination or Change of Control.”
Redwood does not provide for excise tax gross-ups for change-in-control severance payments. Redwood does not have any agreements in place with any executive officer (or any other employee) that provide for an excise tax gross-up for a change-in-control severance payment, whether imposed under Section 280G of the Internal Revenue Code of 1986, as amended (the Code) or otherwise. The Committee does not intend to offer any such excise tax gross-up provisions in any future agreements.



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Section IV - Compensation-Related Policies and Tax Considerations
ØMandatory Executive Stock Ownership Requirements
ØProhibition on Use of Margin, Pledging, and Hedging in Respect of Redwood Shares
ØClawback Policy
ØTax Considerations
ØAccounting Standards

Mandatory Executive Stock Ownership Requirements
As described on pages 11-12 of this Proxy Statement under the heading “Stock Ownership Requirements — Required Stock Ownership by Executive Officers,” the Committee maintains mandatory stock ownership requirements with respect to Redwood’s executive officers, which the Committee believes foster long-term alignment between executives and stockholders. The Committee conducts a review of the executive stock ownership requirements each year.

Mandatory Executive Stock Ownership Requirements
The Chief Executive Officer, the President, and the other executive officers are required to own stock with a value at least equal to (i) six times current salary in the case of the Chief Executive Officer, (ii) three times current salary in the case of the President, and (iii) two times current salary in the case of the other executive officers;
Executive officers are allowed three years to attain the required level of ownership and three years to acquire additional incremental shares if promoted to a position with a higher ownership requirement or when a salary increase results in a higher ownership requirement (if not in compliance at the compliance deadlines, the executive officer is required to retain net after-tax shares delivered as compensation from the 2014 Incentive Plan or from the Executive Deferred Compensation Plan until compliance is achieved);
All shares owned outright are counted, including those held in trust for the executive officer and his or her immediate family, as well as vested DSUs and vested shares held pursuant to other employee plans; and
For purposes of determining compliance, the purchase or acquisition price is used as the value of shares held.
As of the date of this Proxy Statement, all of Redwood’s executive officers were in compliance with these requirements either due to ownership of the requisite number of shares or because the time period during which the executive officer is permitted to attain the required level of ownership had not expired.

Prohibition on Use of Margin, Pledging, and Hedging in Respect of Redwood Shares
Under Redwood’s Insider Trading Policy, Redwood’s executive officers, employees and directors may not acquire securities issued by Redwood using borrowed funds, may not use margin in respect of the purchase of securities issued by Redwood, may not use margin accounts to hold Redwood securities, may not pledge or otherwise use as collateral securities issued by Redwood, and may not engage in hedging or other transactions with respect to their ownership of securities issued by Redwood (including short sales or transactions in puts, calls, or other derivative securities). The Committee believes these proscribed activities would be inconsistent with the purposes and intent of Redwood’s stock ownership requirements.


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Clawback Policy
Redwood continues to maintain a “clawback” policy with respect to bonus, equity, and other incentive payments made to any executive officer whose fraud or misconduct resulted in a financial restatement. Pursuant to this policy, in the event of a significant restatement of Redwood’s financial results due to fraud or misconduct, the Board of Directors of Redwood will review all bonus and incentive compensation payments made on the basis of Redwood having met or exceeded specific performance targets during the period affected by the restatement. If any of the payments would have been lower if determined using the restated results, the Board of Directors will, in its discretion and to the extent permitted by law, seek to recoup from the executive officers whose fraud or misconduct materially contributed to the restatement the excess value or benefit of the prior payments made to those executive officers.

Tax Considerations
The Committee considers the anticipated tax treatment to Redwood and to executive officers when reviewing executive compensation levels and Redwood’s compensation programs. The deductibility of some types of compensation payments can depend upon the timing of an executive’s vesting or exercise of previously granted rights or termination of employment. Interpretations of and changes in applicable tax laws and regulations, as well as other factors beyond the Committee’s control, also can affect the deductibility of compensation.
While the tax impact of any compensation arrangement is one factor considered by the Committee, that impact is evaluated in light of the Committee’s overall compensation philosophy and objectives. The Committee will consider the deductibility of executive compensation, while retaining the discretion it deems necessary to compensate officers in a manner commensurate with performance and the competitive environment for executive talent.

Accounting Standards
Under GAAP, ASC Topic 718 requires Redwood to calculate the grant date “fair value” of certain long-term incentive awards using a variety of assumptions. ASC Topic 718 also requires Redwood to recognize an expense for the fair value of certain equity-based and other long-term incentive compensation awards. Grants of deferred stock units, cash-settled deferred stock units, restricted stock, restricted stock units, performance stock units, and long-term relative TSR performance vesting cash awards will be accounted for under ASC Topic 718. The Compensation Committee regularly considers the accounting implications of significant compensation decisions, especially in connection with decisions that relate to equity incentive award plans and programs. As accounting standards change, the Committee may revise certain programs to align appropriately the accounting expense of equity awards with Redwood’s overall executive compensation philosophy and objectives.
















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Section V - Conclusion
ØCertain Compensation Determinations Relating to 2021
ØCompensation Committee Report

Certain Compensation Determinations Relating to 2021
In accordance with its normal practice, at its meeting in December 2020, the Committee made certain decisions relating to 2021 base salaries and 2021 targets for performance-based annual bonuses for Redwood’s executive officers, as further described below. The Committee retains the discretion to make adjustments to these decisions prior to the completion of its annual year-end review in December 2021.
2021 Base Salaries. In accordance with its above-described policy and practice relating to base salaries (see discussion above on page 50 within this CD&A under the heading “2020 Base Salaries”), in December 2020 the Committee reviewed the base salaries of Redwood’s executive officers for 2021. The following table sets forth each of these executive officer’s 2021 base salary rate per annum, together with a comparison to their 2020 rate per annum. 2020.
Base Salary
Current Executive Officers20202021
Mr. Abate,
Chief Executive Officer
$800,000 (1)$800,000 
Mr. Robinson,
President
$700,000 $750,000 
Mr. Stone,
Executive Vice President and Chief Legal Officer
$420,000 $420,000 
Ms. Macomber,
Chief Human Resource Officer
$350,000 $400,000 
Mr. Cochrane,
Chief Financial Officer
$385,000 $385,000 
(1)
Effective May 1, 2020, and continuing through the end of 2020, Redwood’s CEO voluntarily waived continued receipt of the base salary increase he received at year-end 2019. Actual base salary received by Mr. Abate in 2020 totaled $766,667.

2021 Targets for Performance-Based Annual Bonuses. In accordance with its above-described policy and practice relating to target annual bonuses (see discussion above on pages 50-52 within this CD&A under the heading “2020 Performance-Based Annual Bonus Compensation”), in December 2020 the Committee established a 2021 target annual bonus for each of Redwood’s executive officers for 2021.
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The table below sets forth the 2021 target annual bonuses for each of the current executive officers.     
Current Executive Officers2021 Base
Salary
2021 Target
Annual Bonus
(%)
Change from
2020 Target
Annual Bonus Percentage
(%)(1)
Total
2021 Target
Annual Bonus
($)
Mr. Abate,
Chief Executive Officer
$800,000 185%$1,480,000 
Mr. Robinson,
President
$750,000 175%$1,312,500 
Mr. Stone,
Executive Vice President and Chief Legal Officer
$420,000 125%$525,000 
Ms. Macomber,
Chief Human Resource Officer
$400,000 125%25%$500,000 
Mr. Cochrane,
Chief Financial Officer
$385,000 125%$481,250 
(1)    Amounts set forth in the table under “Change from 2020 Target Annual Bonus Percentage (%)” reflect the
increase, if any, in the 2021 Target Annual Bonus (%) from the 2020 Target Annual Bonus (%) in effect
for each current executive officer at the end of 2020.

2021 Maximum Total Annual Bonuses. The Committee also determined that the maximum total annual bonus for 2021 will continue to be $5 million for each of the CEO and President, and $3 million for each of the other current executive officers.

Form of Payment of 2021 Performance-Based Annual Bonuses. As in prior years, for 2021, the Committee determined that if the performance-based annual bonus earned by an executive officer exceeds two times the target annual bonus designated for that executive officer, the excess portion will not be paid fully in cash, but will instead be paid 50% in cash and 50% in the form of vested DSUs or vested csDSUs, in either case, with a mandatory three-year holding period.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis and Executive Summary of Compensation Discussion and Analysis included in this Proxy Statement. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis and Executive Summary of Compensation Discussion and Analysis be included in this Proxy Statement.

Compensation Committee:
Georganne C. Proctor, Chair
Richard D. Baum
Debora D. Horvath
Jeffrey T. Pero


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Executive Compensation Tables
Summary Compensation

The following table includes information concerning compensation earned by the NEOs for the years ended December 31, 2020, 2019, and 2018, as applicable.
Name and Principal PositionYearSalary
Bonus (1)
Stock
Awards (2)
Non-Equity
Incentive
Plan Compensation(3)
All Other
Compensation(4)
Total
Christopher J. Abate,
Chief Executive Officer(5)
2020$766,667 $986,667 $3,749,987 $— $49,000 $5,552,321 
2019$750,000 — $3,749,992 $2,253,335 $46,000 $6,799,327 
2018$645,833 — $2,999,963 $1,267,778 $37,000 $4,950,574 
Dashiell I. Robinson,
President
2020$700,000 $816,667 $2,499,982 $— $42,000 $4,058,649 
2019$600,000 — $3,499,982 $1,761,533 $36,000 $5,897,515 
2018$515,278 — $2,199,973 $866,996 $19,625 $3,601,872 
Andrew P. Stone,
Executive Vice President and Chief Legal Officer
2020$420,000 $350,000 $1,049,981 $— $26,200 $1,846,181 
2019$400,000 — $1,049,997 $758,077 $25,000 $2,233,074 
2018$400,000 — $949,993 $515,991 $25,000 $1,890,984 
Collin L. Cochrane,
Chief Financial Officer
2020$385,000 $320,834 $774,993 $— $22,250 $1,503,077 
2019$375,000 — $849,986 $715,159 $22,500 $1,962,645 
2018$350,000 — $799,980 $407,800 $21,000 $1,578,780 
Sasha G. Macomber,
Chief Human Resource Officer(6)
2020$350,000 $233,334 $1,099,989 $— $15,658 $1,698,981 
Shoshone ("Bo") Stern, Managing Director - Portfolio Strategy and Risk(7)
2020$435,000 $391,461 $999,989 $— $26,100 $1,852,550 
(1)These amounts are annual bonuses paid in cash for the year indicated with respect to performance during such year (but paid early in the following year). For 2020, these amounts were determined in the discretion of the Compensation Committee based on individual performance, including contribution to achievement of 2020 company goals. See pages 53-55 of this Proxy Statement under the heading “Compensation Discussion and Analysis – Performance-Based Annual Bonuses Earned for 2020” for additional details.
(2)These amounts represent the grant date fair value of stock units awarded, as determined in accordance with FASB Accounting Standards Codification Topic 718. Information regarding the assumptions used to value stock awards is provided in Note 18 to our consolidated financial statements included in our Annual Report on Form 10-K filed on February 26, 2021.
In 2020, Redwood’s NEOs received the following stock unit awards:
    -    All NEOs received an annual grant of deferred stock units, cash-settled deferred stock units and performance stock units on December 16, 2020. These deferred stock units, cash-settled deferred stock units, and performance stock units were granted with the grant date fair values of $8.77, $8.77 and $10.42 per unit, respectively. The maximum potential value of the 2020 performance stock units granted to Messrs. Abate, Robinson, Stone, Cochrane and Stern and Ms. Macomber (assuming the maximum number of units vest and calculated based on the closing price of Redwood's common stock on the NYSE on the grant date) are $3,945,228, $2,630,145, $1,104,647, $815,347, $1,052,049 and $841,635, respectively, assuming Redwood achieves the maximum performance goals during the performance period and that there is no adjustment to the target number of units to reflect the value of any dividends paid on Redwood common stock during the vesting period. As described further in Note 6 below, a portion of Ms. Macomber’s 2019 year-end long-term equity-based award was provided in the form of a grant of deferred stock units on March 2, 2020 with a grant date fair value of $17.65 per unit.
-    For additional details regarding these awards, see the following “Grants of Plan-Based Awards” table.
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(3)These amounts are annual performance-based bonuses paid in cash for each year indicated with respect to performance during such year (but paid early in the following year). As described on pages 55-56 of this Proxy Statement under the heading “Compensation Discussion and Analysis – Grant of Mid-2020 Long-Term Incentive Awards and Other Long-Term Incentives”, on August 5, 2020, each of Mr. Abate, Mr. Robinson, Mr. Stone, Ms. Macomber, and Mr. Stern received a Long-Term Relative TSR Performance Vesting Cash Award, which is reported in the following “Grants of Plan-Based Awards” table; and any realization of award value at the conclusion of the three-year performance vesting period for these awards, if any, will be paid in cash and reported as non-equity incentive plan compensation in the year paid.
(4)These amounts represent matching contributions to our 401(k) Plan and Executive Deferred Compensation Plan, as well as amounts provided under our fitness-related activity reimbursement program. Additional details about these matching contributions and this reimbursement program are outlined on pages 63-64 under headings “401(k) Plan and Other Contributions” and “Other Compensation and Benefits”.
(5)In December 2019, Mr. Abate’s base salary was increased from $750,000 to $800,000 per annum for 2020. In May 2020, Mr. Abate voluntarily waived receipt of this base salary increase for the remainder of 2020. Actual base salary paid paid to Mr. Abate in 2020 was $766,667.
(6)As described on page 59 of this Proxy Statement under the heading “Compensation Discussion and Analysis – 2020 Long-Term Equity-Based Incentive Awards – DSUs Granted to Ms. Macomber in March 2020”, a portion of Ms. Macomber’s 2019 year-end long-term equity-based award was provided in the form of a grant of 16,997 deferred stock units on March 2, 2020, with a grant date fair value of $17.65 per unit. Compensation data for Ms. Macomber for 2019 and 2018 is not provided, as she was not an NEO with respect to 2019 or 2018.
(7)Compensation data for Mr. Stern for 2019 and 2018 is not provided, as he was not an NEO with respect to 2019 or 2018.
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Grants of Plan-Based Awards

The following table reflects estimated possible payouts to the NEOs for 2020 under Redwood’s performance-based bonus compensation program as in place at the outset of 2020, as well as grants of plan-based awards made in 2020 under Redwood’s Incentive Plan. Actual bonus payments for 2020 are reflected in the “Summary Compensation” table above. As discussed above under “Compensation Discussion and Analysis — 2020 Performance-Based Annual Bonus Compensation,” at the outset of 2020 target annual performance-based bonuses for 2020 were structured to be earned based on Adjusted ROE and on achievement of pre-established individual goals. For 2020, annual bonuses were subject to an overall maximum of $5 million for Mr. Abate and Mr. Robinson, and $3 million for each of the other NEOs.
Name
Type of
Award(1)
Grant
Date
  
Estimated Possible Payouts Under Non-Equity Incentive
Plan Awards ($)(5)
  
Estimated Possible Payouts Under Equity Incentive Plan Awards ($)
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) (9)
Grant Date
Fair Value
of Stock
and
Option
Awards
($) (9)
ThresholdTargetMaximumThreshold
Target (6)
Maximum
Christopher J. Abate— — — 1,480,000 3,980,000 — — 116,173 
(7)
— — 
Mid-Year LTI (2)
8/5/2020— 
— — — 3,000,000 — — 
DSU (3)
12/16/2020— — — — — — 106,898 937,495 
csDSU (3)
12/16/2020
— — — — — 106,898 937,495 
PSU (4)
12/16/2020— — — — 179,942 449,855 
(8)
— 1,874,996 
Dashiell I. Robinson— — — 1,225,000 3,725,000 — — 145,216 
(7)
— — 
Mid-Year LTI8/5/2020— — — — — 2,475,200 — — 
DSU (3)
12/16/2020— — — — — — 71,265 624,994 
csDSU (3)
12/16/2020
— — — — — 71,265 624,994 
  
PSU (4)
12/16/2020— — — — 119,961 299,903 
(8)