Exhibit 10.1

ACCREDITED HOME LENDERS HOLDING CO.

DEFERRED COMPENSATION PLAN

9/18/07

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Accredited Home Lenders Holding Co. Deferred Compensation Plan

 

ARTICLE I   

Establishment and Purpose

   1 ARTICLE II   

Definitions

   1 ARTICLE III   

Eligibility and Participation

   9 ARTICLE IV   

Deferrals

   10 ARTICLE V   

Company Contributions

   13 ARTICLE VI   

Benefits

   14 ARTICLE VII   

Modifications to Payment Schedules

   20 ARTICLE VIII   

Valuation of Account Balances; Investments

   21 ARTICLE IX   

Administration

   22 ARTICLE X   

Amendment and Termination

   24 ARTICLE XI   

Informal Funding

   25 ARTICLE XII   

Claims

   25 ARTICLE XIII   

General Provisions

   29

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Accredited Home Lenders Holding Co. Deferred Compensation Plan

ARTICLE I

Establishment and Purpose

Accredited Home Lenders Holding Co. (the “Company”) hereby amends and restates
the Accredited Home Lenders Holding Co. Deferred Compensation Plan (the “Plan”),
effective January 1, 2008, except as otherwise provided herein. This amendment
and restatement applies only to amounts deferred under the Plan on or after
January 1, 2005, and to amounts deferred prior to January 1, 2005 that were not
vested as of December 31, 2004. Amounts deferred under the Plan prior to
January 1, 2005 that were vested as of December 31, 2004 (the “Grandfathered
Accounts”) shall be subject to the provisions of the Plan as in effect on
October 3, 2004, as the same may be amended from time to time by the Company
without material modification, it being expressly intended that such
Grandfathered Accounts are to remain exempt from the requirements of Code
Section 409A. The provisions of the Plan applicable to Grandfathered Accounts
are reflected in this document for ease of reference.

The purpose of the Plan is to attract and retain key employees by providing each
Participant with an opportunity to defer receipt of a portion of their salary,
bonus, and other specified compensation. The Plan is not intended to meet the
qualification requirements of Code Section 401(a), but is intended to meet the
requirements of Code Section 409A, and shall be operated and interpreted
consistent with that intent.

The Plan constitutes an unsecured promise by a Participating Employer to pay
benefits in the future. Participants in the Plan shall have the status of
general unsecured creditors of the Company or the Adopting Employer, as
applicable. Each Participating Employer shall be solely responsible for payment
of the benefits of its employees and their beneficiaries. The Plan is unfunded
for Federal tax purposes and is intended to be an unfunded arrangement for
eligible employees who are part of a select group of management or highly
compensated employees of the Employer within the meaning of Sections 201(2),
301(a)(3) and 401(a)(1) of ERISA. Any amounts set aside to defray the
liabilities assumed by the Company or an Adopting Employer will remain the
general assets of the Company or the Adopting Employer and shall remain subject
to the claims of the Company’s or the Adopting Employer’s creditors until such
amounts are distributed to the Participants.

ARTICLE II

Definitions

 

2.1 Account. Account means a bookkeeping account maintained by the Committee to
record the payment obligation of a Participating Employer to a Participant as
determined under the terms of the Plan. The Committee may maintain an Account to
record the total obligation to a Participant and component Accounts to reflect
amounts payable at different times and in different forms. Reference to an
Account means any such Account established by the Committee, as the context
requires. Accounts are intended to constitute unfunded obligations within the
meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

 

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Accredited Home Lenders Holding Co. Deferred Compensation Plan

 

2.2 Account Balance. Account Balance means, with respect to any Account, the
total payment obligation owed to a Participant from such Account as of the most
recent Valuation Date.

 

2.3 Adopting Employer. Adopting Employer means an Affiliate who, with the
consent of the Company, has adopted the Plan for the benefit of its Eligible
Employees.

 

2.4 Affiliate. Affiliate means a corporation, trade or business that, together
with the Company, is treated as a single employer under Code Section 414(b) or
(c).

 

2.5 Beneficiary. Beneficiary means a natural person, estate, or trust designated
by a Participant to receive payments to which a Beneficiary is entitled in
accordance with provisions of the Plan. The Participant’s spouse, if living,
otherwise the Participant’s estate, shall be the Beneficiary if: (i) the
Participant has failed to properly designate a Beneficiary, or (ii) all
designated Beneficiaries have predeceased the Participant.

A former spouse shall have no interest under the Plan, as Beneficiary or
otherwise, unless the Participant designates such person as a Beneficiary after
dissolution of the marriage, except to the extent provided under the terms of a
domestic relations order as described in Code Section 414(p)(1)(B).

 

2.6 Business Day. A Business Day is each day on which the New York Stock
Exchange is open for business.

 

2.7 Cause. Cause means a termination of employment for any of the following
reasons: (i) theft, dishonesty or falsification of business records;
(ii) improper use or disclosure of confidential or proprietary information
regarding the Company; (iii) failure of an Employee to perform his or her job,
including all assigned duties; (iv) any material breach of a written employment
agreement which is not cured pursuant to the terms of the agreement; (v) an
Employee’s conviction of a criminal act which impairs his or her ability to
perform duties for the Company; or (vi) any action by an Employee which has a
detrimental effect on the business of the Company.

 

2.8

Change in Control. Change in Control means: (i) the acquisition by an individual
“person” (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the “Exchange Act”)) or entity or a group of individuals
or entities acting in concert, directly or indirectly, through one transaction
or a series of related transactions, of more than 50% of the outstanding voting
securities of the Company; (ii) a merger or consolidation of the Company with or
into another entity after which the stockholders of the Company immediately
prior to such transaction hold less than 50% of the voting

 

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securities of the surviving entity; or (iii) a sale of all or substantially all
of the assets of the Company. Notwithstanding the foregoing, a Change in Control
shall not be deemed to have occurred if and to the extent that the Company
completes the initial registration of its securities under Section 12 of the
Exchange Act.

 

2.9 Claimant. Claimant means a Participant or Beneficiary filing a claim under
Article XII of this Plan.

 

2.10 Code. Code means the Internal Revenue Code of 1986, as amended from time to
time.

 

2.11 Code Section 409A. Code Section 409A means section 409A of the Code, and
regulations and other guidance issued by the Treasury Department and Internal
Revenue Service thereunder.

 

2.12 Committee. Committee means the committee appointed by the Board of
Directors of the Company (or the appropriate committee of such board) to
administer the Plan. If no designation is made, the Chief Executive Officer of
the Company or his delegate shall have and exercise the powers of the Committee.

 

2.13 Company. Company means Accredited Home Lenders Holding Co.

 

2.14 Company Contribution. Company Contribution means a credit by a
Participating Employer to a Participant’s Account(s) in accordance with the
provisions of Article V of the Plan. Company Contributions are credited at the
sole discretion of the Participating Employer and the fact that a Company
Contribution is credited in one year shall not obligate the Participating
Employer to continue to make such Company Contribution in subsequent years.
Unless the context clearly indicates otherwise, a reference to Company
Contributions shall include Earnings attributable to such contribution.

 

2.15 Company Stock. Company Stock means shares of common stock issued by
Company.

 

2.16 Compensation. Compensation means a Participant’s base salary, bonus,
commission, and such other cash or equity-based compensation (if any) approved
by the Committee as Compensation that may be deferred under this Plan.
Compensation shall not include any compensation that has been previously
deferred under this Plan or any other arrangement subject to Code Section 409A.
For Directors, Compensation means director fees paid by the Company.

 

2.17

Compensation Deferral Agreement. Compensation Deferral Agreement means an
agreement between a Participant and a Participating Employer that specifies
(i) the amount of each component of Compensation that the Participant has
elected to defer to the Plan in accordance with the provisions of Article IV,
and (ii) the Payment Schedule applicable to one or more Accounts. The specified
distribution date for any Specified

 

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Date Account must be at least two (2) years after the end of the Plan Year for
which Deferrals to such Account are made. The specified distribution date for
any Company Contributions must be at least two (2) years after the end of the
Plan Year for which the Company Contributions are credited to the Participant’s
Account. Unless otherwise specified by the Committee in the Compensation
Deferral Agreement, Participants may defer up to 100% of their Compensation for
a Plan Year. A Compensation Deferral Agreement may also specify the investment
allocation described in Section 8.4.

 

2.18 Death Benefit. Death Benefit means the benefit payable under the Plan to a
Participant’s Beneficiary(ies) upon the Participant’s death as provided in
Section 6.1(e) of the Plan.

 

2.19 Deferral. Deferral means a credit to a Participant’s Account(s) that
records that portion of the Participant’s Compensation that the Participant has
elected to defer to the Plan in accordance with the provisions of Article IV.
Unless the context of the Plan clearly indicates otherwise, a reference to
Deferrals includes Earnings attributable to such Deferrals.

Deferrals shall be calculated with respect to the gross cash Compensation
payable to the Participant prior to any deductions or withholdings, but shall be
reduced by the Committee as necessary so that it does not exceed 100% of the
cash Compensation of the Participant remaining after deduction of all required
income and employment taxes, 401(k) and other employee benefit deductions, and
other deductions required by law. Changes to payroll withholdings that affect
the amount of Compensation being deferred to the Plan shall be allowed only to
the extent permissible under Code Section 409A.

 

2.20 Director. Director means each member of the Board of Directors of the
Company who is not otherwise an Employee of the Company.

 

2.21 Disability Benefit. Disability Benefit means the benefit payable under the
Plan to a Participant in the event such Participant is determined to be
Disabled.

 

2.22 Disabled. Disabled means that a Participant is, by reason of any
medically-determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than twelve months, (i) unable to engage in any substantial gainful activity, or
(ii) receiving income replacement benefits for a period of not less than three
months under an accident and health plan covering employees of the Participant’s
employer. The Committee shall determine whether a Participant is Disabled in
accordance with Code Section 409A provided, however, that a Participant shall be
deemed to be Disabled if determined to be totally disabled by the Social
Security Administration or the Railroad Retirement Board.

 

2.23 Earnings. Earnings means an adjustment to the value of an Account in
accordance with Article VIII.

 

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2.24 Effective Date. Effective Date means January 1, 2008.

 

2.25 Eligible Individual. Eligible Individual means (i) a Director and (ii) a
member of a “select group of management or highly compensated employees” of a
Participating Employer within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA, as determined by the Committee from time to time in its sole
discretion.

 

2.26 Employee. Employee means a common-law employee of an Employer.

 

2.27 Employer. Employer means, with respect to Employees it employs, the Company
and each Affiliate.

 

2.28 ERISA. ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

2.29 Fiscal Year Compensation. Fiscal Year Compensation means Compensation
earned during one or more consecutive fiscal years of a Participating Employer,
all of which is paid after the last day of such fiscal year or years.

 

2.30 Good Reason. Good Reason means: (i) a Participant’s compensation, including
salary, bonus and perquisites, are reduced from the compensation level in effect
for the Participant during the year preceding a Change in Control (or such
shorter period of time as the Participant was employed by the Company); or
(2) without the Participant’s consent, the relocation of the principal place of
the Participant’s employment to a location that is more than fifty (50) miles
from the Participant’s current place of employment; or (3) a material diminution
of the Participant’s title or duties with the Company.

 

2.31 Grandfathered Account. Grandfathered Account means amounts deferred under
the Plan prior to January 1, 2005 that were vested as of December 31, 2004.

 

2.32 Merger Agreement. Merger Agreement means the agreement dated June 4, 2007,
between the Company, LSF5 Accredited Investments, LLC (“Parent”) and LSF5
Accredited Merger Co., Inc. (“Purchaser”), as amended June 15, 2007, pursuant to
which the Company agrees to merge with the Purchaser and become a wholly-owed
subsidiary of Parent.

 

2.33 Participant. Participant means an Eligible Individual who has received
notification of his or her eligibility to defer Compensation under the Plan
under Section 3.1 and any other person with an Account Balance greater than
zero, regardless of whether such individual continues to be an Eligible
Individual. A Participant’s continued participation in the Plan shall be
governed by Section 3.2 of the Plan.

 

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2.34 Participating Employer. Participating Employer means the Company and each
Adopting Employer.

 

2.35 Payment Schedule. Payment Schedule means the date as of which payment of an
Account under the Plan will commence and the form in which payment of such
Account will be made.

 

2.36 Performance-Based Compensation. Performance-Based Compensation means
Compensation where the amount of, or entitlement to, the Compensation is
contingent on the satisfaction of pre-established organizational or individual
performance criteria relating to a performance period of at least twelve
consecutive months. Organizational or individual performance criteria are
considered pre-established if established in writing by not later than ninety
(90) days after the commencement of the period of service to which the criteria
relate, provided that the outcome is substantially uncertain at the time the
criteria are established. The determination of whether Compensation qualifies as
“Performance-Based Compensation” will be made in accordance with Treas. Reg.
Section 1.409A-1(e) and subsequent guidance.

 

2.37 Plan. Generally, the term Plan means the “Accredited Home Lenders Holding
Co. Deferred Compensation Plan” as documented herein and as may be amended from
time to time hereafter. However, to the extent permitted or required under Code
Section 409A, the term Plan may in the appropriate context also mean a portion
of the Plan that is treated as a single plan under Treas. Reg.
Section 1.409A-1(c), or the Plan or portion of the Plan and any other
nonqualified deferred compensation plan or portion thereof that is treated as a
single plan under such section.

 

2.38 Plan Year. Plan Year means January 1 through December 31.

 

2.39 Retirement. Retirement means a Participant’s voluntary Separation from
Service if the sum of such Participant’s age and Years of Service equals or
exceeds 70. A Participant who terminates Service with the Employer and resumes
Service more than 6 months after his or her original termination date, will not
have his or her Service with the Employer prior to his or her original
termination date count for purposes of determining Retirement.

 

2.40 Retirement Benefit. Retirement Benefit means the benefit payable to a
Participant under the Plan following the Retirement of the Participant.

 

2.41 Retirement/Termination Account. Retirement/Termination Account means an
Account established by the Committee to record the amounts payable to a
Participant that have not been allocated to a Specified Date Account. Unless the
Participant has established a Specified Date Account, all Deferrals and Company
Contributions shall be allocated to a Retirement/Termination Account on behalf
of the Participant.

 

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2.42 Separation from Service. An Employee incurs a Separation from Service upon
termination of employment with the Employer. Whether a Separation from Service
has occurred shall be determined by the Committee in accordance with Code
Section 409A. Except in the case of an Employee on a bona fide leave of absence
as provided below, an Employee is deemed to have incurred a Separation from
Service if the Employer and the Employee reasonably anticipated that the level
of services to be performed by the Employee after a date certain would be
reduced to 20% or less of the average services rendered by the Employee during
the immediately preceding 36-month period (or the total period of employment, if
less than 36 months), disregarding periods during which the Employee was on a
bona fide leave of absence.

An Employee who is absent from work due to military leave, sick leave, or other
bona fide leave of absence shall incur a Separation from Service on the first
date immediately following the later of (i) the six-month anniversary of the
commencement of the leave or (ii) the expiration of the Employee’s right, if
any, to reemployment under statute or contract.

For purposes of determining whether a Separation from Service has occurred, the
Employer means the Employer as defined in Section 2.27 of the Plan, except that
for purposes of determining whether another organization is an Affiliate of the
Company, common ownership of at least 50% shall be determinative.

The Committee specifically reserves the right to determine whether a sale or
other disposition of substantial assets to an unrelated party constitutes a
Separation from Service with respect to a Participant providing services to the
seller immediately prior to the transaction and providing services to the buyer
after the transaction. Such determination shall be made in accordance with the
requirements of Code Section 409A.

 

2.43 Service. Service means the Participant’s employment with the Employer on a
substantially full-time basis, or service as a Director. A Participant’s Service
shall not be deemed to have terminated merely because of a change in the
capacity under which the Participant renders Service to the Employer, provided
there is no interruption or termination of the Participant’s Service. A
Participant’s Service shall terminate upon an actual termination of Service,
whether by death, Disability, or otherwise.

 

2.44 Specified Date Account. A Specified Date Account means an Account
established pursuant to Section 4.3 that will be paid (or that will commence to
be paid) at a future date as specified in the Participant’s Compensation
Deferral Agreement. Unless otherwise determined by the Committee, a Participant
may maintain no more than five Specified Date Accounts. A Specified Date Account
may be identified in enrollment materials as an “In-Service Account”.

 

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2.45 Specified Date Benefit. Specified Date Benefit means the benefit payable to
a Participant under the Plan in accordance with Section 6.1(c).

 

2.46 Specified Employee. Specified Employee means an Employee who, as of the
date of his Separation from Service, is a “key employee” of the Company or any
Affiliate, any stock of which is actively traded on an established securities
market or otherwise. An Employee is a key employee if he meets the requirements
of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with
applicable regulations thereunder and without regard to Code Section 416(i)(5))
at any time during the 12-month period ending on the Specified Employee
Identification Date. Such Employee shall be treated as a key employee for the
entire 12-month period beginning on the Specified Employee Effective Date.

For purposes of determining whether an Employee is a Specified Employee, the
compensation of the Employee shall be determined in accordance with the
definition of compensation provided under Treas. Reg. Section 1.415(c)-2(d)(3)
(wages within the meaning of Code section 3401(a) for purposes of income tax
withholding at the source, plus amounts excludible from gross income under
section 125(a), 132(f)(4), 402(e)(3), 402(h)(1)(B), 402(k) or 457(b), without
regard to rules that limit the remuneration included in wages based on the
nature or location of the employment or the services performed); provided,
however, that, with respect to a nonresident alien who is not a Participant in
the Plan, compensation shall not include compensation that is not includible in
the gross income of the Employee under Code Sections 872, 893, 894, 911, 931 and
933, provided such compensation is not effectively connected with the conduct of
a trade or business within the United States.

Notwithstanding anything in this paragraph to the contrary, (i) if a different
definition of compensation has been designated by the Company with respect to
another nonqualified deferred compensation plan in which a key employee
participates, the definition of compensation shall be the definition provided in
Treas. Reg. Section 1.409A-1(i)(2), and (ii) the Company may through action that
is legally binding with respect to all nonqualified deferred compensation plans
maintained by the Company, elect to use a different definition of compensation.

In the event of corporate transactions described in Treas. Reg.
Section 1.409A-1(i)6), the identification of Specified Employees shall be
determined in accordance with the default rules described therein, unless the
Employer elects to utilize the available alternative methodology through
designations made within the timeframes specified therein.

 

2.47 Specified Employee Identification Date. Specified Employee Identification
Date means December 31, unless the Employer has elected a different date through
action that is legally binding with respect to all nonqualified deferred
compensation plans maintained by the Employer.

 

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2.48 Specified Employee Effective Date. Specified Employee Effective Date means
the first day of the fourth month following the Specified Employee
Identification Date, or such earlier date as is selected by the Committee.

 

2.49 Substantial Risk of Forfeiture. Substantial Risk of Forfeiture shall have
the meaning specified in Treas. Reg. Section 1.409A-1(d).

 

2.50 Supplemental Death Benefit. Supplemental Death Benefit means the benefit
payable under the Plan in accordance with Section 6.1(f).

 

2.51 Termination Benefit. Termination Benefit means the benefit payable to a
Participant under the Plan following the Participant’s Separation from Service
prior to Retirement.

 

2.52 Unforeseeable Emergency. An Unforeseeable Emergency means a severe
financial hardship to the Participant resulting from an illness or accident of
the Participant, the Participant’s spouse, the Participant’s dependent (as
defined in Code section 152, without regard to section 152(b)(1), (b)(2), and
(d)(1)(B)), or a Beneficiary; loss of the Participant’s property due to casualty
(including the need to rebuild a home following damage to a home not otherwise
covered by insurance, for example, as a result of a natural disaster); or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant. The types of events which may
qualify as an Unforeseeable Emergency may be limited by the Committee.

 

2.53 Valuation Date. Valuation Date shall mean each Business Day.

 

2.54 Year of Service. A Year of Service shall mean each 12-month period of
continuous service with the Employer.

ARTICLE III

Eligibility and Participation

 

3.1 Eligibility and Participation. An Eligible Individual becomes a Participant
upon the earlier to occur of (i) a credit of Company Contributions under Article
V or (ii) receipt of notification of eligibility to participate.

 

3.2

Duration. A Participant shall be eligible to defer Compensation and receive
allocations of Company Contributions, subject to the terms of the Plan, for as
long as such Participant remains an Eligible Individual. A Participant who is no
longer an Eligible Individual but has not Separated from Service may not defer
Compensation under the Plan but may otherwise exercise all of the rights of a
Participant under the Plan with respect to his or her Account(s). On and after a
Separation from Service, a Participant shall remain a Participant as long as his
or her Account Balance is greater than zero and during such

 

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time may continue to make allocation elections as provided in Section 8.4. An
individual shall cease being a Participant in the Plan when all benefits under
the Plan to which he or she is entitled have been paid.

ARTICLE IV

Deferrals

 

4.1 Deferral Elections, Generally.

 

  (a) An Eligible Individual shall submit a Compensation Deferral Agreement
during the enrollment periods established by the Committee and in the manner
specified by the Committee, but in any event, in accordance with Section 4.2. A
Compensation Deferral Agreement that is not timely filed with respect to a
service period or component of Compensation shall be considered void and shall
have no effect with respect to such service period or Compensation. The
Committee may modify any Compensation Deferral Agreement prior to the date the
election becomes irrevocable under the rules of Section 4.2.

 

  (b) The Participant shall specify on his or her Compensation Deferral
Agreement whether to allocate Deferrals to a Retirement/Termination Account or
to a Specified Date Account. If no designation is made, all Deferrals shall be
allocated to the Retirement/Termination Account. A Participant may also specify
in his or her Compensation Deferral Agreement the Payment Schedule applicable to
his or her Plan Accounts. If the Payment Schedule is not specified in a
Compensation Deferral Agreement, the Payment Schedule shall be the Payment
Schedule specified in Section 6.2.

 

  (c) Notwithstanding other provisions in this document, a Participant must
defer a minimum of $5,000 each Plan Year, or for any Plan Year in which such
Participant begins participation in the Plan after July 1, a minimum of $2,500.

 

4.2 Timing Requirements for Compensation Deferral Agreements.

 

  (a) First Year of Eligibility. In the case of the first year in which an
Eligible Individual becomes eligible to participate in the Plan, he has up to 30
days following his initial eligibility to submit a Compensation Deferral
Agreement with respect to Compensation to be earned during such year. The
Compensation Deferral Agreement described in this paragraph becomes irrevocable
upon the end of such 30-day period. The determination of whether an Eligible
Individual may file a Compensation Deferral Agreement under this paragraph shall
be determined in accordance with the rules of Code Section 409A, including the
provisions of Treas. Reg. Section 1.409A-2(a)(7).

 

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A Compensation Deferral Agreement filed under this paragraph applies to
Compensation earned on and after the date the Compensation Deferral Agreement
becomes irrevocable.

 

  (b) Prior Year Election. Except as otherwise provided in this Section 4.2,
Participants may defer Compensation by filing a Compensation Deferral Agreement
no later than December 31 of the year prior to the year in which the
Compensation to be deferred is earned. A Compensation Deferral Agreement
described in this paragraph shall become irrevocable with respect to such
Compensation as of January 1 of the year in which such Compensation is earned.

 

  (c) Performance-Based Compensation. Participants may file a Compensation
Deferral Agreement with respect to Performance-Based Compensation no later than
the date that is six months before the end of the performance period, provided
that:

 

  i. the Participant performs services continuously from the later of the
beginning of the performance period or the date the criteria are established
through the date the Compensation Deferral Agreement is submitted; and

 

  ii. the Compensation is not readily ascertainable as of the date the
Compensation Deferral Agreement is filed.

A Compensation Deferral Agreement becomes irrevocable with respect to
Performance-Based Compensation as of the day immediately following the latest
date for filing such election. Any election to defer Performance-Based
Compensation that is made in accordance with this paragraph and that becomes
payable as a result of the Participant’s death or Disability or upon a Change in
Control prior to the satisfaction of the performance criteria, will be void.

 

  (d) Sales Commissions. Sales commissions (as defined in Treas. Reg.
Section 1.409A-2(a)(12)(i)) are considered to be earned in the taxable year of
the Participant in which the sale occurs. The Compensation Deferral Agreement
must be filed before the last day of the year preceding the year in which the
sales commissions are earned and becomes irrevocable after that date.

 

  (e) Investment Commissions. Investment commissions (as defined in Treas. Reg.
Section 1.409A-2(a)(12(ii)) are considered to be earned in the 12-month period
immediately preceding the date assets are valued for purposes of calculating the
commission. Investment Commissions must be deferred under the timing rules set
forth in this Section 4.2.

 

  (f)

Fiscal Year Compensation. A Participant may defer Fiscal Year Compensation by
filing a Compensation Deferral Agreement prior to the first day of the fiscal
year

 

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or years in which such Fiscal Year Compensation is earned. The Compensation
Deferral Agreement described in this paragraph becomes irrevocable on the first
day of the fiscal year or years to which it applies.

 

  (g) Short-Term Deferrals. Compensation that meets the definition of a
“short-term deferral” described in Treas. Reg. Section 1.409A-1(b)(4) may be
deferred in accordance with the rules of Article VII, applied as if the date the
Substantial Risk of Forfeiture lapses is the date payments were originally
scheduled to commence, provided, however, that the provisions of Section 7.3
shall not apply to payments attributable to a Change in Control.

 

  (h) Certain Forfeitable Rights. With respect to a legally binding right to a
payment in a subsequent year that is subject to a forfeiture condition requiring
the Participant’s continued services for a period of at least twelve months from
the date the Participant obtains the legally binding right, an election to defer
such Compensation may be made on or before the 30th day after the Participant
obtains the legally binding right to the Compensation, provided that the
election is made at least twelve months in advance of the earliest date at which
the forfeiture condition could lapse. The Compensation Deferral Agreement
described in this paragraph becomes irrevocable after such 30th day. If the
forfeiture condition applicable to the payment lapses before the end of the
required service period as a result of the Participant’s death or Disability or
upon a Change in Control, the Compensation Deferral Agreement will be void
unless it would be considered timely under another rule described in this
Section.

 

  (i) Company Awards. Participating Employers may unilaterally provide for
deferrals of Company awards prior to the date of such awards. Deferrals of
Company awards (such as sign-on, retention, or severance pay) may be negotiated
with a Participant prior to the date the Participant has a legally binding right
to such Compensation.

 

  (j) “Evergreen” Deferral Elections. The Committee, in its discretion, may
provide in the Compensation Deferral Agreement that such Compensation Deferral
Agreement will continue in effect for each subsequent year or performance
period. Such “evergreen” Compensation Deferral Agreements will become effective
with respect to an item of Compensation on the date such election becomes
irrevocable under this Section 4.2. An evergreen Compensation Deferral Agreement
may be terminated or modified prospectively with respect to Compensation for
which such election remains revocable under this Section 4.2. A Participant
whose Compensation Deferral Agreement is cancelled in accordance with
Section 4.6 will be required to file a new Compensation Deferral Agreement under
this Article IV in order to recommence Deferrals under the Plan.

 

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4.3 Allocation of Deferrals. A Compensation Deferral Agreement may allocate
Deferrals to one or more Specified Date Accounts and/or to the
Retirement/Termination Account. The Committee may, in its discretion, establish
a minimum deferral period for Specified Date Accounts.

 

4.4 Deductions from Pay. The Committee has the authority to determine the
payroll practices under which any component of Compensation subject to a
Compensation Deferral Agreement will be deducted from a Participant’s
Compensation.

 

4.5 Vesting. Participant Deferrals shall be 100% vested at all times.

 

4.6

Cancellation of Deferrals. The Committee shall cancel a Participant’s Deferrals
(i) for the balance of the Plan Year in which an Unforeseeable Emergency payment
is made, (ii) if the Participant receives a hardship distribution under the
Employer’s qualified 401(k) plan, through the end of the Plan Year in which the
six-month anniversary of the hardship distribution falls, and (iii) during
periods in which the Participant is unable to perform the duties of his or her
position or any substantially similar position due to a mental or physical
impairment that can be expected to result in death or last for a continuous
period of at least six months, provided cancellation occurs by the later of the
end of the taxable year of the Participant or the 15th day of the third month
following the date the Participant incurs the disability (as defined in this
paragraph (iii)). In the event a Participant receives a voluntary withdrawal
from a Grandfathered Account, the Participant shall not be permitted to make
Deferrals to the Plan in the Plan Year following the Plan Year in which the
withdrawal is made.

ARTICLE V

Company Contributions

 

5.1 Discretionary Company Contributions. The Company may, from time to time in
its sole and absolute discretion, credit Company Contributions to any
Participant in any amount determined by the Company.

 

5.2 Allocation of Company Contributions. The Participant may allocate Company
Contributions to one or more Specified Date Accounts and/or to the
Retirement/Termination Account. Separate Specified Date Accounts may be
established for each portion of a Company Contribution that is scheduled to vest
at a different time. A Participant may not select a distribution date for a
Specified Date Account that is earlier than the date the Company Contribution,
or portion thereof, is scheduled to become vested.

 

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5.3 Vesting. Unless otherwise specified by the Committee at the time of any
Company Contribution, each Company Contribution shall vest, with respect to
Service to the Employer after the date of any such Company Contribution, in
accordance with the following vesting schedule:

 

  (a) Fifty percent (50%) of such Company Contribution shall become vested after
two (2) consecutive Years of Service with the Employer;

 

  (b) An additional twenty-five percent (25%), for a total of seventy-five
percent (75%), of any Company Contribution shall become vested after three
(3) consecutive Years of Service with the Employer; and

 

  (c) The final twenty-five percent (25%), for a total of one hundred percent
(100%), of such Company Contribution shall become vested after four
(4) consecutive Years of Service with the Employer.

All Company Contributions shall become 100% vested upon the occurrence of the
earliest of: (i) the death of the Participant while actively employed; (ii) the
Disability of the Participant, (iii) the Retirement of the Participant, (iv) the
Participant’s termination of employment without Cause, or resignation for Good
Reason, within one (1) year after a Change in Control, or (v) upon termination
of the Plan. The Committee shall determine whether a termination of Service is
for Cause or on account of Good Reason in accordance with the Plan. Further,
with respect to any Participant who is a Director, such Participant shall become
100% vested in all Company Contributions in the event such Participant
(i) resigns at the request of the Company in contemplation of a Change in
Control following the Company entering into a definitive transaction agreement,
the consummation of which would result in a Change of Control, or (ii) resigns
or is removed within one (1) year after a Change in Control. The Participating
Employer may, at any time, in its sole discretion, increase a Participant’s
vested interest in a Company Contribution; provided, however that any Company
Contributions that are scheduled to be paid with respect to the date such
contributions become vested shall be paid on the dates such payments would have
been made had such increase in vesting not occurred. The portion of a
Participant’s Accounts that remains unvested upon his or her Separation from
Service after the application of the terms of this Section 5.3 shall be
forfeited.

 

5.4 Cessation of Deferrals. Notwithstanding any other provision in the Plan, all
contributions to the Plan will cease with respect to Compensation earned after
September 1, 2007.

ARTICLE VI

Benefits

 

6.1 Benefits, Generally. A Participant shall be entitled to the following
benefits under the Plan:

 

  (a) Retirement Benefit. Upon the Participant’s Separation from Service due to
Retirement, he or she shall be entitled to a Retirement Benefit. The Retirement
Benefit shall be equal to the vested portion of the Retirement/Termination
Account and (i) if the Retirement/Termination Account is payable in a lump sum,
the vested unpaid balances of any Specified Date Accounts, or (ii) if the
Retirement/Termination Account is payable in installments, the vested portion of
any Specified Date Accounts with respect to which payments have not yet
commenced. The Retirement Benefit shall be based on the value of those Accounts
as of the end of the month in which Separation from Service occurs. Payment of
the Retirement Benefit will be made or begin in the month following the month in
which Separation from Service occurs, provided, however, that with respect to a
Participant who is a Specified Employee as of the date such Participant incurs a
Separation from Service, payment will be made or begin in the seventh month
following the month in which such Separation from Service occurs. If the
Retirement Benefit is to be paid in the form of installments, any subsequent
installment payments to a Specified Employee will be paid on the anniversary of
the date the initial installment was made.

 

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  (b) Termination Benefit. Upon the Participant’s Separation from Service for
reasons other than death, Disability or Retirement, he or she shall be entitled
to a Termination Benefit. The Termination Benefit shall be equal to the vested
portion of the Retirement/Termination Account and (i) if the
Retirement/Termination Account is payable in a lump sum, the vested unpaid
balances of any Specified Date Accounts, or (ii) if the Retirement/Termination
Account is payable in installments, the vested portion of any Specified Date
Accounts with respect to which payments have not yet commenced. The Termination
Benefit shall be based on the value of the Retirement/Termination Account as of
the end of the month in which Separation from Service occurs. Payment of the
Termination Benefit will be made or begin in the month following the month in
which Separation from Service occurs, provided, however, that with respect to a
Participant who is a Specified Employee as of the date such Participant incurs a
Separation from Service, payment will be made or begin in the seventh month
following the month in which such Separation from Service occurs. If the
Termination Benefit is to be paid in the form of installments, any subsequent
installment payments to a Specified Employee will be paid on the anniversary of
the date the initial installment was made.

 

  (c) Specified Date Benefit. If the Participant has established one or more
Specified Date Accounts, he or she shall be entitled to a Specified Date Benefit
with respect to each such Specified Date Account. The Specified Date Benefit
shall be equal to the vested portion of the Specified Date Account, based on the
value of that Account as of the end of the month designated by the Participant
at the time the Account was established. Payment of the Specified Date Benefit
will be made or begin in the month following the designated month.

 

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  (d) Disability Benefit. Upon a determination by the Committee that a
Participant is Disabled, he or she shall be entitled to a Disability Benefit.
The Disability Benefit shall be equal to the vested portion of the
Retirement/Termination Account and (i) if the Retirement/Termination Account is
payable in a lump sum, the vested unpaid balances of any Specified Date
Accounts, or (ii) if the Retirement/Termination Account is payable in
installments, the vested portion of any Specified Date Accounts with respect to
which payments have not yet commenced. The Disability Benefit shall be based on
the value of the Accounts as of the last day of the month in which Disability
occurs and will be paid in the following month.

 

  (e) Death Benefit. In the event of the Participant’s death, his or her
designated Beneficiary(ies) shall be entitled to a Death Benefit. The Death
Benefit shall be equal to the vested portion of the Retirement/Termination
Account and the vested portion of any unpaid balances in any Specified Date
Accounts. The Death Benefit shall be based on the value of the Accounts as of
the end of the month in which death occurred, with payment made in the following
month.

 

  (f) Supplemental Death Benefit. In the event of the Participant’s death, his
or her designated Beneficiary shall be entitled to a Supplemental Death Benefit
in the amount of $50,000, provided all of the following criteria have been
satisfied prior to the Participant’s death:

 

  1. The Participant is eligible to participate in the Plan and, at the time of
the Participant’s death, had a current account balance;

 

  2. The Participant was an active Employee with the Employer at the time of the
Participant’s death;

 

  3. The Participant completed and submitted an insurance application to the
Committee; and

 

  4. The Participating Employer subsequently purchased an insurance policy on
the life of the Participant, with a death benefit of at least $50,000, and which
policy was in effect at the time of the Participant’s death.

Notwithstanding any provision of this Plan or any other document to the
contrary, the Supplemental Death Benefit payable pursuant to this paragraph
shall be paid only if an insurance policy has been issued on the Participant’s
life and such policy is in force at the time of the Participant’s death and the
Participating

 

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Employer shall have no obligation with respect to the payment of the
supplemental death benefit, or to maintain an insurance policy for any
Participants. The supplemental death benefit provided under this paragraph shall
be taxable income when paid. The Supplemental Death Benefit shall be paid in the
same month as the Death Benefit described in (e) above.

 

  (g) Unforeseeable Emergency Payments. A Participant who experiences an
Unforeseeable Emergency may submit a written request to the Committee to receive
payment of all or any portion of Deferrals credited to his or her Accounts.
Whether a Participant or Beneficiary is faced with an Unforeseeable Emergency
permitting an emergency payment shall be determined by the Committee based on
the relevant facts and circumstances of each case, but, in any case, a
distribution on account of Unforeseeable Emergency may not be made to the extent
that such emergency is or may be reimbursed through insurance or otherwise, by
liquidation of the Participant’s assets, to the extent the liquidation of such
assets would not cause severe financial hardship, or by cessation of Deferrals
under this Plan. If an emergency payment is approved by the Committee, the
amount of the payment shall not exceed the amount reasonably necessary to
satisfy the need, taking into account the additional compensation that is
available to the Participant as the result of cancellation of deferrals to the
Plan, including amounts necessary to pay any taxes or penalties that the
Participant reasonably anticipates will result from the payment. The amount of
the emergency payment shall be subtracted first from the vested portion of the
Participant’s Retirement/Termination Account until depleted and then from the
vested Specified Date Accounts, beginning with the Specified Date Account with
the latest payment commencement date. Emergency payments shall be paid in a
single lump sum within the 90-day period following the date the payment is
approved by the Committee.

 

  (h) Voluntary Withdrawals of Grandfathered Accounts. A Participant may elect
at any time to voluntarily withdraw Deferrals credited to his or her
Grandfathered Account. Company Contributions are not eligible for early
withdrawal. Ninety percent (90%) of the requested amount shall be paid in a
single lump sum distribution as soon as administratively feasible following the
Participant’s request. Upon such withdrawal, the remaining ten percent (10%) of
the requested amount shall be forfeited and the Participant shall have no
further right thereto. The minimum amount of such an early withdrawal shall be
the lesser of $5,000 or 100% of the Deferrals credited to the Participant’s
Grandfathered Account.

 

6.2 Form of Payment.

 

  (a)

Retirement Benefit. A Participant who is entitled to receive a Retirement
Benefit shall receive payment of such benefit in a single lump sum, unless the
Participant elects on his or her initial Compensation Deferral Agreement to have
such benefit

 

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paid in one of the following alternative forms of payment (i) substantially
equal annual installments over a period of 5, 10, or 15 years, as elected by the
Participant; or (ii) a lump sum payment of a percentage of the balance in the
Retirement/ Termination Account, with the balance paid in substantially equal
annual installments over a period of 5, 10, or 15 years, as elected by the
Participant.

 

  (b) Termination Benefit. A Participant who is entitled to receive a
Termination Benefit shall receive payment of such benefit in a single lump sum,
unless the Participant elects on his or her initial Compensation Deferral
Agreement to have such benefit paid in one of the following alternative forms of
payment (i) substantially equal annual installments over a period of 5 or 10
years, as elected by the Participant; or (ii) a lump sum payment of a percentage
of the balance in the Retirement/ Termination Account, with the balance paid in
substantially equal annual installments over a period of 5 or 10 years, as
elected by the Participant.

 

  (c) Specified Date Benefit. The Specified Date Benefit shall be paid in a
single lump sum, unless the Participant elects on the Compensation Deferral
Agreement with which the account was established to have the Specified Date
Account paid in substantially equal annual installments over a period of two to
four years, as elected by the Participant.

Notwithstanding any election of a form of payment by the Participant, upon a
Separation from Service the unpaid balance of a Specified Date Account with
respect to which payments have not commenced shall be paid in accordance with
the form of payment applicable to the Retirement, Termination, Disability or
Death Benefit, as applicable. If such benefit is payable in a single lump sum,
the unpaid balance of all Specified Date Accounts (including those in pay
status) will be paid in a lump sum.

 

  (d) Disability Benefit. A Participant who is entitled to receive a Disability
Benefit shall receive payment of such benefit in a single lump sum, unless the
Participant elects on his or her initial Compensation Deferral Agreement to have
such benefit paid in one of the following alternative forms of payment
(i) substantially equal annual installments over a period of 5, 10, or 15 years,
as elected by the Participant; or (ii) a lump sum payment of a percentage of the
balance in the Retirement/ Termination Account, with the balance paid in
substantially equal annual installments over a period of 5, 10, or 15 years, as
elected by the Participant.

 

  (e) Death Benefit. A Designated Beneficiary who is entitled to receive a Death
Benefit or a Supplemental Death Benefit shall receive payment of such benefit in
a single lump sum.

 

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  (f) Small Account Balances. The Committee may, in its sole discretion which
shall be evidenced in writing no later than the date of payment, elect to pay
the value of the Participant’s Accounts upon a Separation from Service in a
single lump sum if the balance of such Accounts is not greater than the
applicable dollar amount under Code Section 402(g)(1)(B), provided the payment
represents the complete liquidation of the Participant’s interest in the Plan.

 

  (g) Rules Applicable to Installment Payments. If a Payment Schedule specifies
installment payments, annual payments will be made beginning as of the payment
commencement date for such installments and shall continue on each anniversary
thereof until the number of installment payments specified in the Payment
Schedule has been paid. The amount of each installment payment shall be
determined by dividing (a) by (b), where (a) equals the Account Balance as of
the Valuation Date and (b) equals the remaining number of installment payments.

For purposes of Article VII, installment payments will be treated as a single
form of payment. If a lump sum equal to less than 100% of the
Retirement/Termination Account is paid, the payment commencement date for the
installment form of payment will be the first anniversary of the payment of the
lump sum.

 

  (h) Additional Provisions Applicable to Grandfathered Accounts.
Notwithstanding Section 6.2(b), a Participant who is entitled to receive a
Termination Benefit shall receive payment of his Grandfathered Account in a lump
sum unless the Participant elects on his or her initial Compensation Deferral
Agreement to have such benefit paid in annual installments of equal amounts over
a period as provided below:

 

Years of Service

  

Installment Period

5+ Years of Service    5 Years 10+ Years of Service    5/10 Years 15+ Years of
Service    5/10/15 Years

If at the time payments are scheduled to commence, a Participant who elects an
installment distribution does not satisfy the requirements for an installment
distribution or the installment term elected, then such Participant’s
Grandfathered Account shall be distributed in a single lump sum if the
Participant is not eligible for any installment distribution or over the longest
installment term for which the Participant is qualified. Additionally, if the
Participant’s Grandfathered Account balance is less than $25,000 at the time
installment payments are to begin, the Participant’s Grandfathered Account will
automatically be distributed in a single lump sum.

 

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6.3 Acceleration of or Delay in Payments. The Committee, in its sole and
absolute discretion, may elect to accelerate the time or form of payment of a
benefit owed to the Participant hereunder, provided such acceleration is
permitted under Treas. Reg. Section 1.409A-3(j)(4). The Committee may also, in
its sole and absolute discretion, delay the time for payment of a benefit owed
to the Participant hereunder, to the extent permitted under Treas. Reg.
Section 1.409A-2(b)(7). If the Plan receives a domestic relations order (within
the meaning of Code Section 414(p)(1)(B)) directing that all or a portion of a
Participant’s Accounts be paid to an “alternate payee,” any amounts to be paid
to the alternate payee(s) shall be paid in a single lump sum.

 

6.4 Limitation on Distributions to Covered Employees. Notwithstanding any other
provision of this Article VI, in the event that the Participant is a “covered
employee” as that term is defined in Section 162(m)(3) of the Code, or would be
a covered employee if payments from the Plan were distributed in accordance with
Section 6.2, the maximum amount which may be distributed from the Participant’s
Account in any Plan Year shall not exceed one million dollars ($1,000,000) less
the amount of compensation paid to the Participant in such Plan Year which is
not “performance-based” (as defined in Code Section 162(m)(4)(C)), which amount
shall be reasonably determined by the Committee at the time of the proposed
distribution. Any amount which is not distributed to the Participant in a Plan
Year as a result of this limitation shall be distributed to the Participant in
the next Plan Year, subject to compliance with the foregoing limitations set
forth in this Section 6.4.

ARTICLE VII

Modifications to Payment Schedules

 

7.1 Participant’s Right to Modify. A Participant may modify any or all of the
alternative Payment Schedules with respect to an Account, consistent with the
permissible Payment Schedules available under the Plan, provided such
modification complies with the requirements of this Article VII.

 

7.2 Time of Election. The date on which a modification election is submitted to
the Committee must be at least twelve months prior to the date on which payment
is scheduled to commence under the Payment Schedule in effect prior to the
modification.

 

7.3 Date of Payment under Modified Payment Schedule. Except with respect to
modifications that relate to the payment of a Death Benefit or a Disability
Benefit, the date payments are to commence under the modified Payment Schedule
must be no earlier than five years after the date payment would have commenced
under the original Payment Schedule. Under no circumstances may a modification
election result in an acceleration of payments in violation of Code
Section 409A.

 

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7.4 Effective Date. A modification election submitted in accordance with this
Article VII is irrevocable upon receipt by the Committee and becomes effective
12 months after such date.

 

7.5 Effect on Accounts. An election to modify a Payment Schedule is specific to
the Account or payment event to which it applies, and shall not be construed to
affect the Payment Schedules of any other Accounts.

 

7.6 Modifications to Grandfathered Accounts. Notwithstanding the preceding
provisions of this Article VII, a Participant may modify the form of payment
applicable to a Grandfathered Account at any time, provided the modification is
submitted in writing at least 12 months in advance of the date the Grandfathered
Account is scheduled to be paid. A Participant may not modify the distribution
date applicable to a Grandfathered Account scheduled to be paid as a Specified
Date Benefit more than twice.

ARTICLE VIII

Valuation of Account Balances; Investments

 

8.1 Valuation. Deferrals shall be credited to appropriate Accounts on the date
such Compensation would have been paid to the Participant absent the
Compensation Deferral Agreement. Company Contributions shall be credited to the
Retirement/Termination Account at the times determined by the Committee.
Valuation of Accounts shall be performed under procedures approved by the
Committee.

 

8.2 Earnings Credit. Each Account will be credited with Earnings on each
Business Day, based upon the Participant’s investment allocation among a menu of
investment options selected in advance by the Committee, in accordance with the
provisions of this Article VIII (“investment allocation”).

 

8.3 Investment Options. Investment options will be determined by the Committee.
The Committee, in its sole discretion, shall be permitted to add or remove
investment options from the Plan menu from time to time, provided that any such
additions or removals of investment options shall not be effective with respect
to any period prior to the effective date of such change.

 

8.4 Investment Allocations. A Participant’s investment allocation constitutes a
deemed, not actual, investment among the investment options comprising the
investment menu. At no time shall a Participant have any real or beneficial
ownership in any investment option included in the investment menu, nor shall
the Participating Employer or any trustee acting on its behalf have any
obligation to purchase actual securities as a result of a Participant’s
investment allocation. A Participant’s investment allocation shall be used
solely for purposes of adjusting the value of a Participant’s Account Balances.

 

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A Participant shall specify an investment allocation for each of his Accounts in
accordance with procedures established by the Committee. Allocation among the
investment options must be designated in increments of 1%. The Participant’s
investment allocation will become effective on the same Business Day or, in the
case of investment allocations received after a time specified by the Committee,
the next Business Day.

A Participant may change an investment allocation on any Business Day, both with
respect to future credits to the Plan and with respect to existing Account
Balances, in accordance with procedures adopted by the Committee. Changes shall
become effective on the same Business Day or, in the case of investment
allocations received after a time specified by the Committee, the next Business
Day, and shall be applied prospectively.

 

8.5 Unallocated Deferrals and Accounts. If the Participant fails to make an
investment allocation with respect to an Account, such Account shall be invested
in an investment option, the primary objective of which is the preservation of
capital, as determined by the Committee.

 

8.6 Company Contributions Prior to Closing of Merger Agreement. Prior to the
closing of the Merger Agreement, Company Contributions were made in the form of
Company Stock and could not be re-allocated into another investment option.
Effective with the closing of the Merger Agreement, all Company Contributions
made to the Plan will be converted to cash in accordance with the terms of the
Merger Agreement, and affected Participants shall thereafter be permitted to
specify an investment allocation with respect to existing and future Company
Contributions in accordance with the provisions of this Article VIII. Any
Company Contributions for which no investment allocation is made shall be
invested in according with Section 8.5.

ARTICLE IX

Administration

 

9.1 Plan Administration. This Plan shall be administered by the Committee which
shall have discretionary authority to make, amend, interpret and enforce all
appropriate rules and regulations for the administration of this Plan and to
utilize its discretion to decide or resolve any and all questions, including but
not limited to eligibility for benefits and interpretations of this Plan and its
terms, as may arise in connection with the Plan. Claims for benefits shall be
filed with the Committee and resolved in accordance with the claims procedures
in Article XII.

 

9.2

Administration Upon Change in Control. Upon a Change in Control, the Committee,
as constituted immediately prior to such Change in Control, shall continue to
act as the Committee. The individual who was the Chief Executive Officer of the
Company (or if

 

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such person is unable or unwilling to act, the next highest ranking officer)
prior to the Change in Control shall have the authority (but shall not be
obligated) to appoint an independent third party to act as the Committee.

Upon such Change in Control, the Company may not remove the Committee, unless
2/3rds of the members of the Board of Directors of the Company and a majority of
Participants and Beneficiaries with Account Balances consent to the removal and
replacement Committee. Notwithstanding the foregoing, neither the Committee nor
the officer described above shall have authority to direct investment of trust
assets under any rabbi trust described in Section 11.2.

The Participating Employer shall, with respect to the Committee identified under
this Section, (i) pay all reasonable expenses and fees of the Committee,
(ii) indemnify the Committee (including individuals serving as Committee)
against any costs, expenses and liabilities including, without limitation,
attorneys’ fees and expenses arising in connection with the performance of the
Committee hereunder, except with respect to matters resulting from the
Committee’s gross negligence or willful misconduct and (iii) supply full and
timely information to the Committee on all matters related to the Plan, any
rabbi trust, Participants, Beneficiaries and Accounts as the Committee may
reasonably require.

 

9.3 Withholding. The Participating Employer shall have the right to withhold
from any payment due under the Plan (or with respect to any amounts credited to
the Plan) any taxes required by law to be withheld in respect of such payment
(or credit). Withholdings with respect to amounts credited to the Plan shall be
deducted from Compensation that has not been deferred to the Plan.

 

9.4 Indemnification. The Participating Employers shall indemnify and hold
harmless each employee, officer, director, agent or organization, to whom or to
which are delegated duties, responsibilities, and authority under the Plan or
otherwise with respect to administration of the Plan, including, without
limitation, the Committee and its agents, against all claims, liabilities, fines
and penalties, and all expenses reasonably incurred by or imposed upon him or it
(including but not limited to reasonable attorney fees) which arise as a result
of his or its actions or failure to act in connection with the operation and
administration of the Plan to the extent lawfully allowable and to the extent
that such claim, liability, fine, penalty, or expense is not paid for by
liability insurance purchased or paid for by the Participating Employer.
Notwithstanding the foregoing, the Participating Employer shall not indemnify
any person or organization if his or its actions or failure to act are due to
gross negligence or willful misconduct or for any such amount incurred through
any settlement or compromise of any action unless the Participating Employer
consents in writing to such settlement or compromise.

 

9.5 Delegation of Authority. In the administration of this Plan, the Committee
may, from time to time, employ agents and delegate to them such administrative
duties as it sees fit, and may from time to time consult with legal counsel who
shall be legal counsel to the Company.

 

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9.6 Binding Decisions or Actions. The decision or action of the Committee in
respect of any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
thereunder shall be final and conclusive and binding upon all persons having any
interest in the Plan.

ARTICLE X

Amendment and Termination

 

10.1 Amendment and Termination. The Company may at any time and from time to
time amend the Plan or may terminate the Plan as provided in this Article X.
Each Participating Employer may also terminate its participation in the Plan.

 

10.2 Amendments. The Company, by action taken by its Board of Directors, may
amend the Plan at any time and for any reason, provided that any such amendment
shall not reduce the vested Account Balances of any Participant accrued as of
the date of any such amendment or restatement (as if the Participant had
incurred a voluntary Separation from Service on such date or alter a Payment
Schedule. The Committee may amend the Plan without the consent of the Board of
Directors for the purpose of (i) conforming the Plan to the requirements of law,
or (ii) facilitating the administration of the Plan, provided no such amendment
shall substantially increase the costs to the Company unless it is contingent
upon ratification by the Board before coming effective.

 

10.3 Termination. The Company, by action taken by its Board of Directors, may
terminate the Plan and pay Participants and Beneficiaries their Account Balances
in a single lump sum at any time, to the extent and in accordance with Treas.
Reg. Section 1.409A-3(j)(4)(ix). If a Participating Employer terminates its
participation in the Plan, the benefits of affected Employees shall be paid at
the time provided in Article VI.

 

10.4 Accounts Taxable Under Code Section 409A. The Plan is intended to
constitute a plan of deferred compensation that meets the requirements for
deferral of income taxation under Code Section 409A. The Committee, pursuant to
its authority to interpret the Plan, may sever from the Plan or any Compensation
Deferral Agreement any provision or exercise of a right that otherwise would
result in a violation of Code Section 409A.

 

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ARTICLE XI

Informal Funding

 

11.1 General Assets. Obligations established under the terms of the Plan may be
satisfied from the general funds of the Participating Employers, or a trust
described in this Article XI. No Participant, spouse or Beneficiary shall have
any right, title or interest whatever in assets of the Participating Employers.
Nothing contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Participating Employers and any Employee, spouse, or
Beneficiary. To the extent that any person acquires a right to receive payments
hereunder, such rights are no greater than the right of an unsecured general
creditor of the Participating Employer.

 

11.2 Rabbi Trust. A Participating Employer may, in its sole discretion,
establish a grantor trust, commonly known as a rabbi trust, as a vehicle for
accumulating assets to pay benefits under the Plan. Payments under the Plan may
be paid from the general assets of the Participating Employer or from the assets
of any such rabbi trust. Payment from any such source shall reduce the
obligation owed to the Participant or Beneficiary under the Plan.

ARTICLE XII

Claims

 

12.1 Filing a Claim. Any controversy or claim arising out of or relating to the
Plan shall be filed in writing with the Committee which shall make all
determinations concerning such claim. Any claim filed with the Committee and any
decision by the Committee denying such claim shall be in writing and shall be
delivered to the Participant or Beneficiary filing the claim (the “Claimant”).

 

  a. In General. Notice of a denial of benefits (other than Disability benefits)
will be provided within ninety (90) days of the Committee’s receipt of the
Claimant’s claim for benefits. If the Committee determines that it needs
additional time to review the claim, the Committee will provide the Claimant
with a notice of the extension before the end of the initial ninety (90) day
period. The extension will not be more than ninety (90) days from the end of the
initial ninety (90) day period and the notice of extension will explain the
special circumstances that require the extension and the date by which the
Committee expects to make a decision.

 

  b.

Disability Benefits. Notice of denial of Disability benefits will be provided
within forty-five (45) days of the Committee’s receipt of the Claimant’s claim
for Disability benefits. If the Committee determines that it needs additional
time to review the Disability claim, the Committee will provide the Claimant
with a notice of the extension before the end of the initial forty-five (45) day
period. If

 

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the Committee determines that a decision cannot be made within the first
extension period due to matters beyond the control of the Committee, the time
period for making a determination may be further extended for an additional
thirty (30) days. If such an additional extension is necessary, the Committee
shall notify the Claimant prior to the expiration of the initial thirty (30) day
extension. Any notice of extension shall indicate the circumstances
necessitating the extension of time, the date by which the Committee expects to
furnish a notice of decision, the specific standards on which such entitlement
to a benefit is based, the unresolved issues that prevent a decision on the
claim and any additional information needed to resolve those issues. A Claimant
will be provided a minimum of forty-five (45) days to submit any necessary
additional information to the Committee. In the event that a thirty (30) day
extension is necessary due to a Claimant’s failure to submit information
necessary to decide a claim, the period for furnishing a notice of decision
shall be tolled from the date on which the notice of the extension is sent to
the Claimant until the earlier of the date the Claimant responds to the request
for additional information or the response deadline.

 

  c. Contents of Notice. If a claim for benefits is completely or partially
denied, notice of such denial shall be in writing and shall set forth the
reasons for denial in plain language. The notice shall (i) cite the pertinent
provisions of the Plan document and (ii) explain, where appropriate, how the
Claimant can perfect the claim, including a description of any additional
material or information necessary to complete the claim and why such material or
information is necessary. The claim denial also shall include an explanation of
the claims review procedures and the time limits applicable to such procedures,
including a statement of the Claimant’s right to bring a civil action under
Section 502(a) of ERISA following an adverse decision on review. In the case of
a complete or partial denial of a Disability benefit claim, the notice shall
provide a statement that the Committee will provide to the Claimant, upon
request and free of charge, a copy of any internal rule, guideline, protocol, or
other similar criterion that was relied upon in making the decision.

 

12.2

Appeal of Denied Claims. A Claimant whose claim has been completely or partially
denied shall be entitled to appeal the claim denial by filing a written appeal
with a committee designated to hear such appeals (the “Appeals Committee”). A
Claimant who timely requests a review of the denied claim (or his or her
authorized representative) may review, upon request and free of charge, copies
of all documents, records and other information relevant to the denial and may
submit written comments, documents, records and other information relevant to
the claim to the Appeals Committee. All written comments, documents, records,
and other information shall be considered “relevant” if the information (i) was
relied upon in making a benefits determination, (ii) was submitted, considered
or generated in the course of making a benefits decision regardless of whether
it was relied upon to make the decision, or (iii) demonstrates compliance with

 

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administrative processes and safeguards established for making benefit
decisions. The Appeals Committee may, in its sole discretion and if it deems
appropriate or necessary, decide to hold a hearing with respect to the claim
appeal.

 

  (a) In General. Appeal of a denied benefits claim (other than a Disability
benefits claim) must be filed in writing with the Appeals Committee no later
than sixty (60) days after receipt of the written notification of such claim
denial. The Appeals Committee shall make its decision regarding the merits of
the denied claim within sixty (60) days following receipt of the appeal (or
within one hundred and twenty (120) days after such receipt, in a case where
there are special circumstances requiring extension of time for reviewing the
appealed claim). If an extension of time for reviewing the appeal is required
because of special circumstances, written notice of the extension shall be
furnished to the Claimant prior to the commencement of the extension. The notice
will indicate the special circumstances requiring the extension of time and the
date by which the Appeals Committee expects to render the determination on
review. The review will take into account comments, documents, records and other
information submitted by the Claimant relating to the claim without regard to
whether such information was submitted or considered in the initial benefit
determination.

 

  (b) Disability Benefits. Appeal of a denied Disability benefits claim must be
filed in writing with the Appeals Committee no later than one hundred eighty
(180) days after receipt of the written notification of such claim denial. The
review shall be conducted by the Appeals Committee (exclusive of the person who
made the initial adverse decision or such person’s subordinate). In reviewing
the appeal, the Appeals Committee shall (i) not afford deference to the initial
denial of the claim, (ii) consult a medical professional who has appropriate
training and experience in the field of medicine relating to the Claimant’s
disability and who was neither consulted as part of the initial denial nor is
the subordinate of such individual and (iii) identify the medical or vocational
experts whose advice was obtained with respect to the initial benefit denial,
without regard to whether the advice was relied upon in making the decision. The
Appeals Committee shall make its decision regarding the merits of the denied
claim within forty-five (45) days following receipt of the appeal (or within
ninety (90) days after such receipt, in a case where there are special
circumstances requiring extension of time for reviewing the appealed claim). If
an extension of time for reviewing the appeal is required because of special
circumstances, written notice of the extension shall be furnished to the
Claimant prior to the commencement of the extension. The notice will indicate
the special circumstances requiring the extension of time and the date by which
the Appeals Committee expects to render the determination on review. Following
its review of any additional information submitted by the Claimant, the Appeals
Committee shall render a decision on its review of the denied claim.

 

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  (c) Contents of Notice. If a benefits claim is completely or partially denied
on review, notice of such denial shall be in writing and shall set forth the
reasons for denial in plain language.

The decision on review shall set forth (i) the specific reason or reasons for
the denial, (ii) specific references to the pertinent Plan provisions on which
the denial is based, (iii) a statement that the Claimant is entitled to receive,
upon request and free of charge, reasonable access to and copies of all
documents, records, or other information relevant (as defined above) to the
Claimant’s claim, and (iv) a statement describing any voluntary appeal
procedures offered by the plan and a statement of the Claimant’s right to bring
an action under Section 502(a) of ERISA.

 

  (d) For the denial of a Disability benefit, the notice will also include a
statement that the Appeals Committee will provide, upon request and free of
charge, (i) any internal rule, guideline, protocol or other similar criterion
relied upon in making the decision, (ii) any medical opinion relied upon to make
the decision and (iii) the required statement under
Section 2560.503-1(j)(5)(iii) of the Department of Labor regulations.

 

12.3 Claims Appeals Upon Change in Control. Upon a Change in Control, the
Appeals Committee, as constituted immediately prior to such Change in Control,
shall continue to act as the Appeals Committee. Upon such Change in Control, the
Company may not remove any member of the Appeals Committee, but may replace
resigning members if 2/3rds of the members of the Board of Directors of the
Company and a majority of Participants and Beneficiaries with Account Balances
consent to the replacement.

The Appeals Committee shall have the exclusive authority at the appeals stage to
interpret the terms of the Plan and resolve appeals under the Claims Procedure.

Each Participating Employer shall, with respect to the Committee identified
under this Section, (i) pay its proportionate share of all reasonable expenses
and fees of the Appeals Committee, (ii) indemnify the Appeals Committee
(including individual committee members) against any costs, expenses and
liabilities including, without limitation, attorneys’ fees and expenses arising
in connection with the performance of the Appeals Committee hereunder, except
with respect to matters resulting from the Appeals Committee’s gross negligence
or willful misconduct and (iii) supply full and timely information to the
Appeals Committee on all matters related to the Plan, any rabbi trust,
Participants, Beneficiaries and Accounts as the Appeals Committee may reasonably
require.

 

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12.4 Legal Action. A Claimant may not bring any legal action, including
commencement of any arbitration, relating to a claim for benefits under the Plan
unless and until the Claimant has followed the claims procedures under the Plan
and exhausted his or her administrative remedies under such claims procedures.

 

12.5 Discretion of Appeals Committee. All interpretations, determinations and
decisions of the Appeals Committee with respect to any claim shall be made in
its sole discretion, and shall be final and conclusive.

ARTICLE XIII

GENERAL PROVISIONS

 

13.1 Anti-assignment Rule. No interest of any Participant, spouse or Beneficiary
under this Plan and no benefit payable hereunder shall be assigned as security
for a loan, and any such purported assignment shall be null, void and of no
effect, nor shall any such interest or any such benefit be subject in any
manner, either voluntarily or involuntarily, to anticipation, sale, transfer,
assignment or encumbrance by or through any Participant, spouse or Beneficiary.
Notwithstanding anything to the contrary herein, however, the Committee has the
discretion to make payments to an alternate payee in accordance with the terms
of a domestic relations order (as defined in Code Section 414(p)(1)(B)).

 

13.2 No Legal or Equitable Rights or Interest. No Participant or other person
shall have any legal or equitable rights or interest in this Plan that are not
expressly granted in this Plan. Participation in this Plan does not give any
person any right to be retained in the service of the Participating Employer.
The right and power of a Participating Employer to dismiss or discharge an
Employee is expressly reserved. The Participating Employers make no
representations or warranties as to the tax consequences to a Participant or a
Participant’s beneficiaries resulting from a deferral of income pursuant to the
Plan.

 

13.3 No Employment Contract. Nothing contained herein shall be construed to
constitute a contract of employment between an Employee and a Participating
Employer.

 

13.4 Notice. Any notice or filing required or permitted to be delivered to the
Committee under this Plan shall be delivered in writing, in person, or through
such electronic means as is established by the Committee. Notice shall be deemed
given as of the date of delivery or, if delivery is made by mail, as of the date
shown on the postmark on the receipt for registration or certification. Written
transmission shall be sent by certified mail to:

ACCREDITED HOME LENDERS HOLDING CO.

ATTN: STEPHEN OSTIGUY, SR MANAGER, HUMAN RESOURCES

15253 AVENUE OF SCIENCE

SAN DIEGO, CA 92128

 

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Any notice or filing required or permitted to be given to a Participant under
this Plan shall be sufficient if in writing or hand-delivered, or sent by mail
to the last known address of the Participant.

 

13.5 Headings. The headings of Sections are included solely for convenience of
reference, and if there is any conflict between such headings and the text of
this Plan, the text shall control.

 

13.6 Invalid or Unenforceable Provisions. If any provision of this Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof and the Committee may elect in its sole
discretion to construe such invalid or unenforceable provisions in a manner that
conforms to applicable law or as if such provisions, to the extent invalid or
unenforceable, had not been included.

 

13.7 Lost Participants or Beneficiaries. Any Participant or Beneficiary who is
entitled to a benefit from the Plan has the duty to keep the Committee advised
of his or her current mailing address. If benefit payments are returned to the
Plan or are not presented for payment after a reasonable amount of time, the
Committee shall presume that the payee is missing. The Committee, after making
such efforts as in its discretion it deems reasonable and appropriate to locate
the payee, shall stop payment on any uncashed checks and may discontinue making
future payments until contact with the payee is restored.

 

13.8 Governing Law. To the extent not preempted by ERISA, the laws of the State
of California shall govern the construction and administration of the Plan.

IN WITNESS WHEREOF, the undersigned executed this Plan as of the 18th day of
September, 2007, to be effective as of the Effective Date.

 

Accredited Home Lenders Holding Co.

   

By:

 

/s/ James A. Konrath

  By:  

/s/ Joseph J. Lydon

Its:

 

Chairman

  Its:   President

 

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