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                                                                    EXHIBIT 10.4

                       ACCREDITED HOME LENDERS HOLDING CO.
                             2002 STOCK OPTION PLAN

     1.   Establishment, Purpose and Term of Plan.

          1.1  Establishment. The Accredited Home Lenders Holding Co. 2002 Stock
Option Plan (the "Plan") is hereby established effective as of the effective
date of the initial registration by the Company of its Stock under Section 12 of
the Securities Exchange Act of 1934, as amended (the "Effective Date").

          1.2  Purpose. The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an incentive
to attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

          1.3  Term of Plan. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Options shall be granted, if at
all, within ten (10) years from the earlier of the date the Plan is adopted by
the Board or the date the Plan is duly approved by the shareholders of the
Company.

     2.   Definitions and Construction.

          2.1  Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:

               (a)  "Affiliate" means (i) an entity, other than a Parent
Corporation, that directly, or indirectly through one or more intermediary
entities, controls the Company or (ii) an entity, other than a Subsidiary
Corporation, that is controlled by the Company directly, or indirectly through
one or more intermediary entities. For this purpose, the term "control"
(including the term "controlled by") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
the relevant entity, whether through the ownership of voting securities, by
contract or otherwise; or shall have such other meaning assigned such term for
the purposes of registration on Form S-8 under the Securities Act.

               (b)  "Board" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).

               (c)  "Code" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

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               (d)  "Committee" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.

               (e)  "Company" means Accredited Home Lenders Holding Co., a
Delaware corporation, or any successor corporation thereto.

               (f)  "Consultant" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such services are provided would not preclude the Company
from offering or selling securities to such person pursuant to the Plan in
reliance on either the exemption from registration provided by Rule 701 under
the Securities Act or, if the Company is required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act, registration on a Form S-8 Registration
Statement under the Securities Act.

               (g)  "Director" means a member of the Board or of the board of
directors of any other Participating Company.

               (h)  "Disability" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company Group because
of the sickness or injury of the Optionee.

               (i)  "Employee" means any person treated as an employee
(including an Officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual's employment or termination of employment,
as the case may be. For purposes of an individual's rights, if any, under the
Plan as of the time of the Company's determination, all such determinations by
the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary
determination.

               (j)  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

               (k)  "Fair Market Value" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its discretion,
or by the Company, in its

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discretion, if such determination is expressly allocated to the Company herein,
subject to the following:

                    (i)   If, on such date, the Stock is listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be the closing price of a share of Stock (or the mean of the
closing bid and asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or
such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant date
does not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
discretion.

                    (ii)  If, on such date, the Stock is not listed on a
national or regional securities exchange or market system, the Fair Market Value
of a share of Stock shall be as determined by the Board in good faith without
regard to any restriction other than a restriction which, by its terms, will
never lapse.

               (l)  "Incentive Stock Option" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.

               (m)  "Insider" means an Officer, a Director of the Company or
other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.

               (n)  "Nonstatutory Stock Option" means an Option not intended to
be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.

               (o)  "Officer" means any person designated by the Board as an
officer of the Company.

               (p)  "Option" means a right to purchase Stock pursuant to the
terms and conditions of the Plan. An Option may be either an Incentive Stock
Option or a Nonstatutory Stock Option.

               (q)  "Option Agreement" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof. An Option Agreement may consist of a form of "Notice of Grant of Stock
Option" and a form of "Stock Option Agreement" incorporated therein by
reference, or such other form or forms as the Board may approve from time to
time.

               (r)  "Optionee" means a person who has been granted one or more
Options.

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               (s)  "Outside Director" means a Director who is not an Employee
of the Company or of any Parent Corporation or Subsidiary Corporation.

               (t)  "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (u)  "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation or Affiliate.

               (v)  "Participating Company Group" means, at any point in time,
all corporations collectively which are then Participating Companies.

               (w)  "Prior Plan Options" means, any option granted pursuant to
the Company's 1998 Stock Option Plan, 1995 Executive Stock Option Plan or 1995
Stock Option Plan which is outstanding on or after the date on which the Board
adopts the Plan or which is granted thereafter and prior to the Effective Date.

               (x)  "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.

               (y)  "Section 162(m)" means Section 162(m) of the Code.

               (z)  "Securities Act" means the Securities Act of 1933, as
amended.

               (aa) "Service" means an Optionee's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. An Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. Furthermore, an Optionee's Service
with the Participating Company Group shall not be deemed to have terminated if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Optionee's Option
Agreement. The Optionee's Service shall be deemed to have terminated either upon
an actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.

               (bb) "Stock" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

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               (cc) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

               (dd) "Ten Percent Owner Optionee" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company (other than an Affiliate) within the meaning of Section
422(b)(6) of the Code.

          2.2  Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

     3.   ADMINISTRATION.

          3.1  Administration by the Board. The Plan shall be administered by
the Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option.

          3.2  Authority of Officers. Any Officer shall have the authority to
act on behalf of the Company with respect to any matter, right, obligation,
determination or election which is the responsibility of or which is allocated
to the Company herein, provided the Officer has apparent authority with respect
to such matter, right, obligation, determination or election.

          3.3  Powers of the Board. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its discretion:

               (a)  to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;

               (b)  to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;

               (c)  to determine the Fair Market Value of shares of Stock or
other property;

               (d)  to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v)

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the time of the expiration of the Option, (vi) the effect of the Optionee's
termination of Service with the Participating Company Group on any of the
foregoing, and (vii) all other terms, conditions and restrictions applicable to
the Option or such shares not inconsistent with the terms of the Plan;

               (e)  to approve one or more forms of Option Agreement;

               (f)  to amend, modify, extend, cancel or renew any Option or to
waive any restrictions or conditions applicable to any Option or any shares
acquired upon the exercise thereof;

               (g)  to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
Service with the Participating Company Group;

               (h)  to delegate to any proper Officer the authority to grant one
or more Options, without further approval of the Board, to any person eligible
pursuant to Section 5, other than a person who, at the time of such grant, is an
Insider; provided, however, that (i) such Options shall not be granted to any
one person within any fiscal year of the Company for more than one thousand
(1,000) shares in the aggregate, (ii) the exercise price per share of each such
Option shall be equal to the Fair Market Value per share of the Stock on the
effective date of grant, and (iii) each such Option shall be subject to the
terms and conditions of the appropriate standard form of Option Agreement
approved by the Board and shall conform to the provisions of the Plan and such
other guidelines as shall be established from time to time by the Board

               (i)  to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and

               (j)  to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

          3.4  Administration with Respect to Insiders. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

          3.5  Committee Complying with Section 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m), the Board may
establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Option which might reasonably be anticipated
to result in the payment of employee

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remuneration that would otherwise exceed the limit on employee remuneration
deductible for income tax purposes pursuant to Section 162(m).

          3.6  Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

     4.   Shares Subject to Plan.

          4.1  Maximum Number of Shares Issuable.

               (a)  Initial Share Reserve. Subject to adjustment as provided in
Section 4.2, the maximum aggregate number of shares of Stock that may be issued
under the Plan shall be Two Million Two Hundred Twenty-One Thousand and
Thirty-Nine (2,221,039). This share reserve shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof. However, the
share reserve, determined at any time, shall be reduced by the number of shares
subject to the Prior Plan Options. If any outstanding Option, including any
Prior Plan Options, for any reason expires or is terminated or canceled or if
shares of Stock are acquired upon the exercise of an Option, including any Prior
Plan Options, subject to a Company repurchase option and are repurchased by the
Company at the Optionee's exercise price, the shares of Stock allocable to the
unexercised portion of such Option or Prior Plan Options or such repurchased
shares of Stock shall again be available for issuance under the Plan.

               (b)  Automatic Share Reserve Increase. The number of shares of
Stock available for issuance under the Plan shall be cumulatively increased on
January 1, 2003 and July 1, 2003 and each January 1 and July 1 thereafter until
and including July 1, 2012 (the "Automatic Increase") by (i) the difference
(calculated as of the immediately preceding December 31 and June 30, as
applicable) between twelve percent (12%) of the total issued and outstanding
shares of Stock of the Company and the sum of (1) the number of shares subject
to outstanding Options under the Plan, (2) the number of shares subject to
outstanding Prior Plan Options, and (3) the number of shares available for grant
under the Plan or (ii) such lesser number of shares determined by the Board. For
the purposes of determining this Automatic Increase, any outstanding derivative
security which may be converted into shares of Stock of the Company (other than
Options or Prior Plan Options) shall be considered to have actually been

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converted and thus included in the number of issued and outstanding shares of
Stock of the Company on each December 31 and June 30.

               (c)  ISO Share Limit. Except as adjusted pursuant to Section 4.2,
in no event shall the number of shares of Stock cumulatively available for
issuance pursuant to the exercise of Incentive Stock Options (the "ISO Share
Issuance Limit") exceed Two Million Two Hundred Twenty-One Thousand and
Thirty-Nine (2,221,039), cumulatively increased by that portion of each
Automatic Increase that does not exceed Two Hundred Thousand (200,000) shares.

          4.2  Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options, in the Section 162(m) Grant Limit
set forth in Section 5.4, in the ISO Share Issuance Limit set forth in Section
4.1, and in the exercise price per share of any outstanding Options. If a
majority of the shares which are of the same class as the shares that are
subject to outstanding Options are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event, as defined in
Section 9.1) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise price per share of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its discretion. Notwithstanding the foregoing, any fractional share resulting
from an adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise price of any Option be
decreased to an amount less than the par value, if any, of the stock subject to
the Option. The adjustments determined by the Board pursuant to this Section 4.2
shall be final, binding and conclusive.

     5.   Eligibility and Option Limitations.

          5.1  Persons Eligible for Options. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of an employment or other service relationship
with the Participating Company Group. Eligible persons may be granted more than
one (1) Option. However, eligibility in accordance with this Section shall not
entitle any person to be granted an Option, or, having been granted an Option,
to be granted an additional Option.

          5.2  Option Grant Restrictions. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted only
a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1. An Incentive Stock Option may be granted only to a

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person who, on the effective date of grant, is an Employee of the Company, a
Parent Corporation or a Subsidiary Corporation (each being an "ISO-Qualifying
Corporation"). Any person who is not an Employee of an ISO-Qualifying
Corporation on the effective date of the grant of an Option to such person may
be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted
to a prospective Employee upon the condition that such person become an Employee
of an ISO-Qualifying Corporation shall be deemed granted effective on the date
such person commences Service with an ISO-Qualifying Corporation, with an
exercise price determined as of such date in accordance with Section 6.1.

          5.3  Fair Market Value Limitation. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such options which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

          5.4  Section 162(m) Grant Limit. Subject to adjustment as provided in
Section 4.2, at any such time as the Company is a "publicly held corporation"
within the meaning of Section 162(m), no Employee or prospective Employee shall
be granted one or more Options within any fiscal year of the Company which in
the aggregate are for the purchase of more than One Million (1,000,000) shares
(the "Section 162(m) Grant Limit"). An Option which is canceled in the same
fiscal year of the Company in which it was granted shall continue to be counted
against the Section 162(m) Grant Limit for such period.

     6.   Terms and Conditions of Options.

          Options shall be evidenced by Option Agreements specifying the number
of shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following terms and
conditions:

          6.1  Exercise Price. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Option

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shall be not less than the Fair Market Value of a share of Stock on the
effective date of grant of the Option, and (b) no Incentive Stock Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.

          6.2  Exercisability and Term of Options. Options shall be exercisable
at such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Option Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after
the expiration of five (5) years after the effective date of grant of such
Option, and (c) no Option granted to a prospective Employee, prospective
Consultant or prospective Director may become exercisable prior to the date on
which such person commences Service with a Participating Company. Subject to the
foregoing, unless otherwise specified by the Board in the grant of an Option,
any Option granted hereunder shall terminate ten (10) years after the effective
date of grant of the Option, unless earlier terminated in accordance with its
provisions.

          6.3  Payment of Exercise Price.

               (a) Forms of Consideration Authorized. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Optionee having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the assignment
to the Company of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iv) provided that the Optionee is an Employee
(unless otherwise not prohibited by law, including, without limitation, any
regulation promulgated by the Board of Governors of the Federal Reserve System)
and in the Company's sole discretion at the time the Option is exercised, by
delivery of the Optionee's promissory note in a form approved by the Company for
the aggregate exercise price, provided that, if the Company is incorporated in
the State of Delaware, the Optionee shall pay in cash that portion of the
aggregate exercise price not less than the par value of the shares being
acquired, (v) by such other consideration as may be approved by the Board from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by approval
of or by amendment to the standard forms of Option Agreement described in
Section 8, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.

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               (b)  Limitations on Forms of Consideration.

                    (i)   Tender of Stock. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Board, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months (and not used for
another Option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

                    (ii)  Cashless Exercise. The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.

                    (iii) Payment by Promissory Note. No promissory note shall
be permitted if the exercise of an Option using a promissory note would be a
violation of any law. Any permitted promissory note shall be on such terms as
the Board shall determine. The Board shall have the authority to permit or
require the Optionee to secure any promissory note used to exercise an Option
with the shares of Stock acquired upon the exercise of the Option or with other
collateral acceptable to the Company. Unless otherwise provided by the Board, if
the Company at any time is subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.

          6.4  Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its discretion, the Company shall have the right to require the
Optionee, through payroll withholding, cash payment or otherwise, including by
means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Fair
Market Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's tax
withholding obligations have been satisfied by the Optionee.

                                       11

<PAGE>

          6.5  Effect of Termination of Service.

               (a)  Option Exercisability. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the Board
in the grant of an Option and set forth in the Option Agreement, an Option shall
be exercisable after an Optionee's termination of Service only during the
applicable time period determined in accordance with this Section 6.6 and
thereafter shall terminate:

                    (i)   Disability. If the Optionee's Service terminates
because of the Disability of the Optionee, the Option, to the extent unexercised
and exercisable on the date on which the Optionee's Service terminated, may be
exercised by the Optionee (or the Optionee's guardian or legal representative)
at any time prior to the expiration of twelve (12) months (or such longer period
of time as determined by the Board, in its discretion) after the date on which
the Optionee's Service terminated, but in any event no later than the date of
expiration of the Option's term as set forth in the Option Agreement evidencing
such Option (the "Option Expiration Date").

                    (ii)  Death. If the Optionee's Service terminates because of
the death of the Optionee, the Option, to the extent unexercised and exercisable
on the date on which the Optionee's Service terminated, may be exercised by the
Optionee's legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee's death at any time prior to the
expiration of twelve (12) months (or such longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months (or such longer period of time as
determined by the Board, in its discretion) after the Optionee's termination of
Service.

                    (iii) Other Termination of Service. If the Optionee's
Service terminates for any reason, except Disability or death, the Option, to
the extent unexercised and exercisable by the Optionee on the date on which the
Optionee's Service terminated, may be exercised by the Optionee at any time
prior to the expiration of three (3) months (or such longer period of time as
determined by the Board, in its discretion) after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.

               (b)  Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the
Option shall remain exercisable until three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

               (c)  Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the

                                       12

<PAGE>

tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of Service, or (iii) the
Option Expiration Date.

          6.6  Transferability of Options. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Board, in its
discretion, and set forth in the Option Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form
S-8 Registration Statement under the Securities Act.

     7.   Terms and Conditions of Outside Director Options.

          Outside Director Options shall be evidenced by Option Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Board shall from time to time establish. Outside Director Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the terms and conditions of Section 6 to the extent no
inconsistent with this Section and the following terms and conditions:

          7.1  Automatic Grant. Subject to the execution by an Outside Director
of an appropriate Option Agreement, Options shall be granted automatically and
without further action of the Board, as follows:

               (a) Initial Option. Each person who, as of the Effective Date, is
an Outside Director who has never received a stock option from the Company, or
from Accredited Home Lenders Inc., a California corporation, or who first
becomes an Outside Director after the Effective Date shall be granted on the
later of the Effective Date or the date such person first becomes an Outside
Director an Option to purchase Seventeen Thousand Five Hundred (17,500) shares
of Stock (an "Initial Option").

               (b)  Annual Option. Each Outside Director shall be granted on the
date of each annual meeting of the stockholders of the Company which occurs on
or after the Effective Date (an "Annual Meeting") immediately following which
such person remains an Outside Director an Option to purchase Seven Thousand
Five Hundred (7,500) shares of Stock (an "Annual Option"); provided, however,
that an Outside Director granted an Initial Option on, or within a period of six
(6) months prior to, the date of an Annual Meeting shall not be granted an
Annual Option pursuant to this Section with respect to the same Annual Meeting.

               (c)  Right to Decline Outside Director Option. Notwithstanding
the foregoing, any person may elect not to receive an Outside Director Option by
delivering written notice of such election to the Board no later than the day
prior to the date such Option would otherwise be granted. A person so declining
an Outside Director Option shall receive no payment or other consideration in
lieu of such declined Outside Director Option. A person who has declined an
Outside Director Option may revoke such election by delivering written notice of

                                       13

<PAGE>

such revocation to the Board no later than the day prior to the date such
Outside Director Option would be granted pursuant to Section 7.1(a) or (b), as
the case may be.

          7.2  Exercisability and Term of Outside Director Options. Each Outside
Director Option shall vest and become exercisable as set forth below and shall
terminate and cease to be exercisable on the tenth (10th) anniversary of the
date of grant of the Outside Direct Option, unless earlier terminated in
accordance with the terms of the Plan or the Option Agreement evidencing such
Outside Director Option.

               (a) Initial Options. Except as otherwise provided in the Plan or
in the Option Agreement evidencing such Outside Director Option, each Initial
Option shall vest and become exercisable in four (4) substantially equal
installments on each of the first four (4) anniversaries of the date of grant of
the Initial Option, provided that the Optionee's Service has not terminated
prior to the relevant date.

               (b) Annual Options. Except as otherwise provided in the Plan or
in the Option Agreement evidencing such Outside Director Option, each Annual
Option shall vest and become exercisable in four (4) substantially equal
installments on each of the first four (4) anniversaries of the date of grant of
the Annual Option, provided that the Optionee's Service has not terminated prior
to the relevant date.

          7.3  Effect of Change in Control on Outside Director Options. In the
event of a Change in Control, as defined in Section 9.1, any unexercisable or
unvested portions of outstanding Outside Director Options and any shares
acquired upon the exercise thereof held by Outside Directors whose Service has
not terminated prior to such date shall be immediately exercisable and vested in
full as of the date ten (10) days prior to the date of the Change in Control.
The exercise or vesting of any Outside Director Option and any shares acquired
upon the exercise thereof that was permissible solely by reason of this Section
7.3 shall be conditioned upon the consummation of the Change in Control. In
addition, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiring Corporation"),
may either assume the Company's rights and obligations under outstanding Outside
Director Options or substitute for outstanding Options substantially equivalent
options for the Acquiring Corporation's stock. Any Outside Director Options
which are neither assumed or substituted for by the Acquiring Corporation in
connection with the Change in Control nor exercised as of the date of the Change
in Control shall terminate and cease to be outstanding effective as of the date
of the Change in Control. Notwithstanding the foregoing, if the corporation the
stock of which is subject to the outstanding Outside Director Options
immediately prior to an Ownership Change Event described in Section 9.1(a)(i)
constituting a Change in Control is the surviving or continuing corporation and
immediately after such Ownership Change Event less than fifty percent (50%) of
the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Outside Director
Options shall not terminate.

                                       14

<PAGE>

     8.   Standard Forms of Option Agreement.

          8.1  Option Agreement. Unless otherwise provided by the Board at the
time the Option is granted, an Option shall comply with and be subject to the
terms and conditions set forth in the form of Option Agreement approved by the
Board concurrently with its adoption of the Plan and as amended from time to
time.

          8.2  Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of any standard form of Option Agreement
described in this Section 8 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.

     9.   Change in Control.

          9.1  Definitions.

               (a)  An "Ownership Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

               (b)  A "Change in Control" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, a "Transaction")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 9.1(a)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the "Transferee"), as the case
may be. For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting securities of one or more corporations or other business entities which
own the Company or the Transferee, as the case may be, either directly or
through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of
the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.

          9.2  Effect of Change in Control on Options. In the event of a Change
in Control, the surviving, continuing, successor, or purchasing corporation or
other business entity or parent thereof, as the case may be (the "Acquiring
Corporation"), may, without the consent of the Optionee, either assume the
Company's rights and obligations under outstanding Options

                                       15

<PAGE>

or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration received pursuant to the Change
in Control with respect to such shares shall continue to be subject to all
applicable provisions of the Option Agreement evidencing such Option except as
otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
9.1(a)(i) constituting a Change in Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate unless the Board otherwise provides in its discretion.

     10.  Provision of Information.

          Each Optionee shall be given access to information concerning the
Company equivalent to that information generally made available to the Company's
common shareholders.

     11.  Compliance with Securities Law.

          The grant of Options and the issuance of shares of Stock upon exercise
of Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company's legal counsel
to be necessary to the lawful issuance and sale of any shares hereunder shall
relieve the Company of any liability in respect of the failure to issue or sell
such shares as to which such requisite authority shall not have been obtained.
As a condition to the exercise of any Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.

                                       16

<PAGE>

     12.  Termination or Amendment of Plan.

          The Board may terminate or amend the Plan at any time. However,
subject to changes in applicable law, regulations or rules that would permit
otherwise, without the approval of the Company's shareholders, there shall be
(a) no increase in the maximum aggregate number of shares of Stock that may be
issued under the Plan (except by operation of the provisions of Section 4.2),
(b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's shareholders under any applicable law, regulation or rule. No
termination or amendment of the Plan shall affect any then outstanding Option
unless expressly provided by the Board. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option without
the consent of the Optionee, unless such termination or amendment is required to
enable an Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.

     13.  Shareholder Approval.

          The Plan or any increase in the maximum aggregate number of shares of
Stock issuable thereunder as provided in Section 4.1 (the "Authorized Shares")
shall be approved by the shareholders of the Company within twelve (12) months
of the date of adoption thereof by the Board. Options granted prior to
shareholder approval of the Plan or in excess of the Authorized Shares
previously approved by the shareholders shall become exercisable no earlier than
the date of shareholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.

                                       17

<PAGE>

                                  PLAN HISTORY

June 24, 2002       Board of Directors of Accredited Home Lenders, Inc., a
                    California corporation ("AHL California") adopts Plan
                    effective as of the closing of the initial public offering
                    (the "IPO") of AHL California's wholly-owned subsidiary,
                    Accredited Home Lenders Holding Co., a Delaware corporation
                    ("Holding Co."), with an initial reserve of Two Million Two
                    Hundred Twenty-One Thousand and Thirty-Nine (2,221,039)
                    shares. The number of shares of stock available for issuance
                    under the Plan shall be cumulatively increased on January 1,
                    2003 and July 1, 2003 and each January 1 and July 1
                    thereafter until and including July 1, 2012 by (i) the
                    difference (calculated as of the immediately preceding
                    December 31 and June 30, as applicable) between twelve
                    percent (12%) of the total issued and outstanding shares of
                    Stock of the Company and the sum of (1) the number of shares
                    subject to outstanding Options under the Plan, (2) the
                    number of shares subject to outstanding Prior Plan Options,
                    and (3) the number of shares available for grant under the
                    Plan or (ii) such lesser number of shares determined by the
                    Board.

June 24, 2002       Sole director and sole stockholder of Holding Co. approve
                    Plan effective as of the closing of the IPO with an initial
                    reserve of Two Million Two Hundred Twenty-One Thousand and
                    Thirty-Nine (2,221,039) shares. The number of shares of
                    stock available for issuance under the Plan shall be
                    cumulatively increased on January 1, 2003 and July 1, 2003
                    and each January 1 and July 1 thereafter until and including
                    July 1, 2012 by (i) the difference (calculated as of the
                    immediately preceding December 31 and June 30, as
                    applicable) between twelve percent (12%) of the total issued
                    and outstanding shares of Stock of the Company and the sum
                    of (1) the number of shares subject to outstanding Options
                    under the Plan, (2) the number of shares subject to
                    outstanding Prior Plan Options, and (3) the number of shares
                    available for grant under the Plan or (ii) such lesser
                    number of shares determined by the Board.

__________, 2002    Shareholders of AHL California approve Plan effective as of
                    the closing of the IPO, with an initial reserve of Two
                    Million Two Hundred Twenty-One Thousand and Thirty-Nine
                    (2,221,039) shares. The number of shares of stock available
                    for issuance under the Plan shall be cumulatively increased
                    on January 1, 2003 and July 1, 2003 and each January 1 and
                    July 1 thereafter until and including July 1, 2012 by (i)
                    the difference (calculated as of the immediately preceding
                    December 31 and June 30, as applicable) between twelve
                    percent (12%) of the total issued and outstanding

<PAGE>

                    shares of Stock of the Company and the sum of (1) the number
                    of shares subject to outstanding Options under the Plan, (2)
                    the number of shares subject to outstanding Prior Plan
                    Options, and (3) the number of shares available for grant
                    under the Plan or (ii) such lesser number of shares
                    determined by the Board.

__________, 2002    Effective date of holding-company transaction, whereby AHL
                    California becomes the wholly-owned operating subsidiary of
                    Holding Co.

__________, 200_    IMPORTANT NOTE: At first annual stockholders meeting
                    following close of 3rd calendar year following the calendar
                    year of IPO (unless plan is materially amended at an earlier
                    date), obtain public company stockholder approval of
                    amendment to plan to add Section 162(m) grant limit. See
                    Treas. Reg. 1.162-27(f) (private to public company
                    transition rule).

<PAGE>

                                STANDARD FORMS OF

                       ACCREDITED HOME LENDERS HOLDING CO.

                         NOTICE OF GRANT OF STOCK OPTION

                                       AND

                             STOCK OPTION AGREEMENT

<PAGE>

                       ACCREDITED HOME LENDERS HOLDING CO.
                         NOTICE OF GRANT OF STOCK OPTION


       ________________________ (the "Optionee") has been granted an option (the
"Option") to purchase certain shares of Stock of Accredited Home Lenders Holding
Co. pursuant to the Accredited Home Lenders Holding Co. 2002 Stock Option Plan
(the "Plan"), as follows:

       Date of Option Grant:       ______________

       Number of Option Shares:    ______________

       Exercise Price:             $_____________ per share

       Initial Vesting Date:       ______________

       Option Expiration Date:     The date ten (10) years after the Date of
                                   Option Grant.

       Tax Status of Option:       ______________ Stock Option. (Enter
                                   "Incentive" or "Nonstatutory." If blank, this
                                   Option will be a Nonstatutory Stock Option.)

       Vested Shares: Except as provided in the Stock Option Agreement, the
       number of Vested Shares (disregarding any resulting fractional share) as
       of any date is determined by multiplying the Number of Option Shares by
       the "Vested Ratio" determined as of such date as follows:

                                                                    Vested Ratio
                                                                    ------------

                                   Prior to Initial Vesting Date          0
                                   On Initial Vesting Date, provided
                                   the Optionee's Service has not
                                   terminated prior to such date         1/4

                                   Plus:
                                   For each full month of the
                                   Optionee's continuous Service
                                   from Initial Vesting Date until
                                   the Vested Ratio equals 1/1, an
                                   additional                            1/48

       By their signatures below, the Company and the Optionee agree that the
Option is governed by this Notice and by the provisions of the Plan and the
Stock Option Agreement, both of which are attached to and made a part of this
document. The Optionee acknowledges receipt of copies of the Plan and the Stock
Option Agreement, represents that the Optionee has read and is familiar with
their provisions, and hereby accepts the Option subject to all of their terms
and conditions.

ACCREDITED HOME LENDERS HOLDING CO.     OPTIONEE

By: _______________________________      _______________________________________
                                         Signature

Its: ______________________________      _______________________________________
                                         Date

Address:___________________________      _______________________________________
                                         Address

___________________________________      _______________________________________

ATTACHMENTS:   2002 Stock Option Plan, as amended to the Date of Option Grant;
               Stock Option Agreement and Exercise Notice

<PAGE>

                       ACCREDITED HOME LENDERS HOLDING CO.
                             STOCK OPTION AGREEMENT

       Accredited Home Lenders Holding Co. has granted to the individual (the
"Optionee") named in the Notice of Grant of Stock Option (the "Notice") to which
this Stock Option Agreement (the "Option Agreement") is attached an option (the
"Option") to purchase certain shares of Stock upon the terms and conditions set
forth in the Notice and this Option Agreement. The Option has been granted
pursuant to and shall in all respects be subject to the terms and conditions of
the Accredited Home Lenders Holding Co. 2002 Stock Option Plan (the "Plan"), as
amended to the Date of Option Grant, the provisions of which are incorporated
herein by reference. By signing the Notice, the Optionee: (a) represents that
the Optionee has read and is familiar with the terms and conditions of the
Notice, the Plan and this Option Agreement, including the Effect of Termination
of Service set forth in Section 7, (b) accepts the Option subject to all of the
terms and conditions of the Notice, the Plan and this Option Agreement, (c)
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under the Notice, the
Plan or this Option Agreement, and (d) acknowledges receipt of a copy of the
Notice, the Plan and this Option Agreement.

       1.   Definitions and Construction.

            1.1   Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Notice or the Plan.

            1.2   Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.

       2.   Tax Consequences.

            2.1   Tax Status of Option. This Option is intended to have the tax
status designated in the Notice.

                  (a)  Incentive Stock Option. If the Notice so designates, this
Option is intended to be an Incentive Stock Option within the meaning of Section
422(b) of the Code, but the Company does not represent or warrant that this
Option qualifies as such. The Optionee should consult with the Optionee's own
tax advisor regarding the tax effects of this Option and the requirements
necessary to obtain favorable income tax treatment under Section 422 of the
Code, including, but not limited to, holding period requirements. (NOTE TO
OPTIONEE: If the Option is exercised more than three (3) months after the date
on which you cease to be an Employee (other than by reason of your death or
permanent and total disability as defined in Section 22(e)(3) of the Code), the
Option will be treated as a Nonstatutory Stock Option and not as an Incentive
Stock Option to the extent required by Section 422 of the Code.)

                                       1

<PAGE>

                  (b)  Nonstatutory Stock Option. If the Notice so designates,
this Option is intended to be a Nonstatutory Stock Option and shall not be
treated as an Incentive Stock Option within the meaning of Section 422(b) of the
Code.

            2.2   ISO Fair Market Value Limitation. If the Notice designates
this Option as an Incentive Stock Option, then to the extent that the Option
(together with all Incentive Stock Options granted to the Optionee under all
stock option plans of the Participating Company Group, including the Plan)
becomes exercisable for the first time during any calendar year for shares
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000),
the portion of such options which exceeds such amount will be treated as
Nonstatutory Stock Options. For purposes of this Section 2.2, options designated
as Incentive Stock Options are taken into account in the order in which they
were granted, and the Fair Market Value of stock is determined as of the time
the option with respect to such stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 2.2, such
different limitation shall be deemed incorporated herein effective as of the
date required or permitted by such amendment to the Code. If the Option is
treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option
in part by reason of the limitation set forth in this Section 2.2, the Optionee
may designate which portion of such Option the Optionee is exercising. In the
absence of such designation, the Optionee shall be deemed to have exercised the
Incentive Stock Option portion of the Option first. Separate certificates
representing each such portion shall be issued upon the exercise of the Option.
(NOTE TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other Incentive Stock Options you hold (whether granted
pursuant to the Plan or any other stock option plan of the Participating Company
Group) is greater than $100,000, you should contact the Chief Financial Officer
of the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)

       3.   Administration.

            All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.

       4.   Exercise of the Option.

            4.1   Right to Exercise. Except as otherwise provided herein, the
Option shall be exercisable on and after the Date of Option Grant (or if later,
the Optionee's Service commencement date) and prior to the termination of the
Option (as provided in Section 6) in an amount not to exceed the number of
Vested Shares less the number of shares previously acquired upon exercise of the
Option.

            4.2   Method of Exercise. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as

                                       2

<PAGE>

to the Optionee's investment intent with respect to such shares as may be
required pursuant to the provisions of this Option Agreement. The written notice
must be signed by the Optionee and must be delivered in person, by certified or
registered mail, return receipt requested, by confirmed facsimile transmission,
or by such other means as the Company may permit, to the Chief Financial Officer
of the Company, or other authorized representative of the Participating Company
Group, prior to the termination of the Option as set forth in Section 6,
accompanied by full payment of the aggregate Exercise Price for the number of
shares of Stock being purchased. The Option shall be deemed to be exercised upon
receipt by the Company of such written notice and the aggregate Exercise Price.

            4.3   Payment of Exercise Price.

                  (a)  Forms of Consideration Authorized. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company, or attestation to the
ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value (as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less than
the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined
in Section 4.3(b), or (iv) by any combination of the foregoing.

                  (b)  Limitations on Forms of Consideration.

                       (i)   Tender of Stock. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. The Option may not be
exercised by tender to the Company, or attestation to the ownership, of shares
of Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.

                       (ii)  Cashless Exercise. A "Cashless Exercise" means the
delivery of a properly executed notice together with irrevocable instructions to
a broker in a form acceptable to the Company providing for the assignment to the
Company of the proceeds of a sale or loan with respect to some or all of the
shares of Stock acquired upon the exercise of the Option pursuant to a program
or procedure approved by the Company (including, without limitation, through an
exercise complying with the provisions of Regulation T as promulgated from time
to time by the Board of Governors of the Federal Reserve System). The Company
reserves, at any and all times, the right, in the Company's sole and absolute
discretion, to decline to approve or terminate any such program or procedure.

            4.4   Tax Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax

                                       3

<PAGE>

withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Company shall have no
obligation to deliver shares of Stock until the tax withholding obligations of
the Participating Company Group have been satisfied by the Optionee.

          4.5 Certificate Registration. Except in the event the Exercise Price
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.

          4.6 Restrictions on Grant of the Option and Issuance of Shares. The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

          4.7 Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of the Option.

     5.   Nontransferability of the Option.

          The Option may be exercised during the lifetime of the Optionee only
by the Optionee or the Optionee's guardian or legal representative and may not
be assigned or transferred in any manner except by will or by the laws of
descent and distribution. Following the death of the Optionee, the Option, to
the extent provided in Section 7, may be exercised by

                                       4

<PAGE>

the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.

     6. Termination of the Option.

        The Option shall terminate and may no longer be exercised on the first
to occur of (a) the Option Expiration Date, (b) the last date for exercising the
Option following termination of the Optionee's Service as described in Section
7, or (c) a Change in Control to the extent provided in Section 8.

     7. Effect of Termination of Service.

        7.1 Option Exercisability.

            (a) Disability. If the Optionee's Service with the Participating
Company Group terminates because of the Disability of the Optionee, the Option,
to the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's guardian
or legal representative) at any time prior to the expiration of twelve (12)
months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date.

            (b) Death. If the Optionee's Service with the Participating Company
Group terminates because of the death of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee's legal representative or other
person who acquired the right to exercise the Option by reason of the Optionee's
death at any time prior to the expiration of twelve (12) months after the date
on which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of Service.

            (c) Other Termination of Service. If the Optionee's Service with the
Participating Company Group terminates for any reason, except Disability or
death, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee's Service terminated, may be exercised by the
Optionee at any time prior to the expiration of three (3) months (or such other
longer period of time as determined by the Board, in its discretion) after the
date on which the Optionee's Service terminated, but in any event no later than
the Option Expiration Date.

        7.2 Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

        7.3 Extension if Optionee Subject to Section 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section 7.1
of shares acquired upon the exercise of the Option would subject the Optionee to
suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth

                                       5

<PAGE>

(10th) day following the date on which a sale of such shares by the Optionee
would no longer be subject to such suit, (ii) the one hundred and ninetieth
(190th) day after the Optionee's termination of Service, or (iii) the Option
Expiration Date.

     8.  Change in Control.

         In the event of a Change in Control, the Acquiring Corporation may
either assume the Company's rights and obligations under the Option or
substitute for the Option a substantially equivalent option for the Acquiring
Corporation's stock. The Option shall terminate and cease to be outstanding
effective as of the date of the Change in Control to the extent that the Option
is neither assumed or substituted for by the Acquiring Corporation in connection
with the Change in Control nor exercised as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise of the
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise
provided herein.

     9.  Adjustments for Changes in Capital Structure.

         In the event of any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a
majority of the shares which are of the same class as the shares that are
subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "New Shares"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 9 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

     10. Rights as a Stockholder, Employee or Consultant.

         The Optionee shall have no rights as a stockholder with respect to any
shares covered by the Option until the date of the issuance of a certificate for
the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 9. If the Optionee is an Employee, the
Optionee understands and acknowledges that, except as otherwise provided in a
separate, written employment agreement between a Participating Company and the
Optionee, the Optionee's employment is "at will" and is for no specified term.
Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or

                                       6

<PAGE>

interfere in any way with any right of the Participating Company Group to
terminate the Optionee's Service as an Employee or Consultant, as the case may
be, at any time.

     11. Notice of Sales Upon Disqualifying Disposition.

         The Optionee shall dispose of the shares acquired pursuant to the
Option only in accordance with the provisions of this Option Agreement. In
addition, if the Notice designates this Option as an Incentive Stock Option, the
Optionee shall (a) promptly notify the Chief Financial Officer of the Company if
the Optionee disposes of any of the shares acquired pursuant to the Option
within one (1) year after the date the Optionee exercises all or part of the
Option or within two (2) years after the Date of Option Grant and (b) provide
the Company with a description of the circumstances of such disposition. Until
such time as the Optionee disposes of such shares in a manner consistent with
the provisions of this Option Agreement, unless otherwise expressly authorized
by the Company, the Optionee shall hold all shares acquired pursuant to the
Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after the exercise of the Option and the two-year
period immediately after Date of Option Grant. At any time during the one-year
or two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the Option requesting the
transfer agent for the Company's stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such
transfer shall continue notwithstanding that a legend has been placed on the
certificate pursuant to the preceding sentence.

     12. Legends.

         The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions, and, if applicable, that
the shares were acquired upon exercise of an Incentive Stock Option on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section.

     13. Lock-up Agreement.

         The Optionee hereby agrees that in the event of any underwritten public
offering of stock, including an initial public offering of stock, made by the
Company pursuant to an effective registration statement filed under the
Securities Act, the Optionee shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act.

                                        7

<PAGE>

     14. Restrictions on Transfer of Shares.

         No shares acquired upon exercise of the Option may be sold, exchanged,
transferred (including, without limitation, any transfer to a nominee or agent
of the Optionee), assigned, pledged, hypothecated or otherwise disposed of,
including by operation of law, in any manner which violates any of the
provisions of this Option Agreement, and any such attempted disposition shall be
void. The Company shall not be required (a) to transfer on its books any shares
which will have been transferred in violation of any of the provisions set forth
in this Option Agreement or (b) to treat as owner of such shares or to accord
the right to vote as such owner or to pay dividends to any transferee to whom
such shares will have been so transferred.

     15. Miscellaneous Provisions.

         15.1 Binding Effect. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

         15.2 Termination or Amendment. The Board may terminate or amend the
Plan or the Option at any time; provided, however, that except as provided in
Section 8 in connection with a Change in Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is
required to enable the Option, if designated an Incentive Stock Option in the
Notice, to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.

         15.3 Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given (except to the extent that this
Option Agreement provides for effectiveness only upon actual receipt of such
notice) upon personal delivery or upon deposit in the United States Post Office,
by registered or certified mail, with postage and fees prepaid, addressed to the
other party at the address shown below that party's signature on the Notice or
at such other address as such party may designate in writing from time to time
to the other party.

         15.4 Integrated Agreement. The Notice, this Option Agreement and the
Plan constitute the entire understanding and agreement of the Optionee and the
Participating Company Group with respect to the subject matter contained herein
or therein and supersedes any prior agreements, understandings, restrictions,
representations, or warranties among the Optionee and the Participating Company
Group with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein,
the provisions of the Notice and the Option Agreement shall survive any exercise
of the Option and shall remain in full force and effect.

         15.5 Applicable Law. This Option Agreement shall be governed by the
laws of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.

                                        8

<PAGE>

         15.6 Counterparts. The Notice may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                       9

<PAGE>

(TM) Incentive Stock Option               Optionee:_____________________________
(TM) Nonstatutory Stock Option
                                                   Date:________________________


                          STOCK OPTION EXERCISE NOTICE

Accredited Home Lenders Holding Co.
Attention: Chief Financial Officer
15030 Avenue of Science, Suite 100
San Diego, CA  92128

Ladies and Gentlemen:

     1. Option. I was granted an option (the "Option") to purchase shares of the
common stock (the "Shares") of Accredited Home Lenders Holding Co. (the
"Company") pursuant to the Company's 2002 Stock Option Plan (the "Plan"), my
Notice of Grant of Stock Option (the "Notice") and my Stock Option Agreement
(the "Option Agreement") as follows:

        Grant Number:
                                            ____________________________________

        Date of Option Grant:
                                            ____________________________________

        Number of Option Shares:
                                            ____________________________________

        Exercise Price per Share:           $___________________________________


     2. Exercise of Option. I hereby elect to exercise the Option to purchase
the following number of Shares:

        Total Shares Purchased:              ___________________________________


        Total Exercise Price (Total Shares
        X  Price per Share)                  $__________________________________


     3. Payments. I enclose payment in full of the total exercise price for the
Shares in the following form(s), as authorized by my Option Agreement:

        (TM) Cash:                           $__________________________________

        (TM) Check:                          $__________________________________

        (TM) Tender of Company Stock:         Contact Plan Administrator

        (TM) Cashless exercise                Contact Plan Administrator

     4. Tax Withholding. Subject to the Option Agreement, I authorize payroll
withholding and otherwise will make adequate provision for the federal, state,
local and foreign tax withholding obligations of the Company, if any, in
connection with the Option.

                                       1

<PAGE>

         5. Optionee Information.

            My address is:______________________________________________________

                          ______________________________________________________


            My Social Security Number is:_______________________________________

         6. Notice of Disqualifying Disposition. If the Option is an Incentive
Stock Option, I agree that I will promptly notify the Chief Financial Officer of
the Company if I transfer any of the Shares within one (1) year from the date I
exercise all or part of the Option or within two (2) years of the Date of Option
Grant.

         7. Binding Effect. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, to all of which I hereby expressly assent. This Agreement
shall inure to the benefit of and be binding upon the my heirs, executors,
administrators, successors and assigns.

         I understand that I am purchasing the Shares pursuant to the terms of
the Plan, the Notice and my Option Agreement, copies of which I have received
and carefully read and understand.

                                               Very truly yours,

                                               _________________________________
                                               (Signature)

Receipt of the above is hereby acknowledged.

ACCREDITED HOME LENDERS HOLDING CO.

By:______________________________

Title:___________________________

Dated:___________________________

                                       2

<PAGE>

                       ACCREDITED HOME LENDERS HOLDING CO.
                             STOCK OPTION AGREEMENT
                              (Transferable Option)



     Accredited Home Lenders Holding Co. has granted to the individual (the
"Optionee") named in the Notice of Grant of Stock Option (the "Notice") to which
this Stock Option Agreement (the "Option Agreement") is attached an option (the
"Option") to purchase certain shares of Stock upon the terms and conditions set
forth in the Notice and this Option Agreement. The Option has been granted
pursuant to and shall in all respects be subject to the terms and conditions of
the Accredited Home Lenders Holding Co. 2002 Stock Option Plan (the "Plan"), as
amended to the Date of Option Grant, the provisions of which are incorporated
herein by reference. By signing the Notice, the Optionee: (a) represents that
the Optionee has read and is familiar with the terms and conditions of the
Notice, the Plan and this Option Agreement, including the Effect of Termination
of Service set forth in Section 7, (b) accepts the Option subject to all of the
terms and conditions of the Notice, the Plan and this Option Agreement, (c)
agrees to accept as binding, conclusive and final all decisions or
interpretations of the Board upon any questions arising under the Notice, the
Plan or this Option Agreement, and (d) acknowledges receipt of a copy of the
Notice, the Plan and this Option Agreement.

     1.     Definitions and Construction.

            1.1      Definitions. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Notice or the Plan.

            1.2      Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.

     2.     Tax Consequences.

            2.1      Tax Status of Option. This Option is intended to have the
tax status designated in the Notice.

                     (a)     Incentive Stock Option. If the Notice so
designates, this Option is intended to be an Incentive Stock Option within the
meaning of Section 422(b) of the Code, but the Company does not represent or
warrant that this Option qualifies as such. The Optionee should consult with the
Optionee's own tax advisor regarding the tax effects of this Option and the
requirements necessary to obtain favorable income tax treatment under Section
422 of the Code, including, but not limited to, holding period requirements.
(NOTE TO OPTIONEE: If the Option is exercised more than three (3) months after
the date on which you cease to be an Employee (other than by reason of your
death or permanent and total disability as defined in Section 22(e)(3) of the
Code), the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)

                                       1

<PAGE>

                     (b)     Nonstatutory Stock Option. If the Notice so
designates, this Option is intended to be a Nonstatutory Stock Option and shall
not be treated as an Incentive Stock Option within the meaning of Section 422(b)
of the Code.

            2.2      ISO Fair Market Value Limitation. If the Notice designates
this Option as an Incentive Stock Option, then to the extent that the Option
(together with all Incentive Stock Options granted to the Optionee under all
stock option plans of the Participating Company Group, including the Plan)
becomes exercisable for the first time during any calendar year for shares
having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000),
the portion of such options which exceeds such amount will be treated as
Nonstatutory Stock Options. For purposes of this Section 2.2, options designated
as Incentive Stock Options are taken into account in the order in which they
were granted, and the Fair Market Value of stock is determined as of the time
the option with respect to such stock is granted. If the Code is amended to
provide for a different limitation from that set forth in this Section 2.2, such
different limitation shall be deemed incorporated herein effective as of the
date required or permitted by such amendment to the Code. If the Option is
treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option
in part by reason of the limitation set forth in this Section 2.2, the Optionee
may designate which portion of such Option the Optionee is exercising. In the
absence of such designation, the Optionee shall be deemed to have exercised the
Incentive Stock Option portion of the Option first. Separate certificates
representing each such portion shall be issued upon the exercise of the Option.
(NOTE TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the
Exercise Price multiplied by the Number of Option Shares) plus the aggregate
exercise price of any other Incentive Stock Options you hold (whether granted
pursuant to the Plan or any other stock option plan of the Participating Company
Group) is greater than $100,000, you should contact the Chief Financial Officer
of the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)

     3.     Administration.

            All questions of interpretation concerning this Option Agreement
shall be determined by the Board. All determinations by the Board shall be final
and binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.

     4.     Exercise of the Option.

            4.1      Right to Exercise. Except as otherwise provided herein, the
Option shall be exercisable on and after the Date of Option Grant (or if later,
the Optionee's Service commencement date) and prior to the termination of the
Option (as provided in Section 6) in an amount not to exceed the number of
Vested Shares less the number of shares previously acquired upon exercise of the
Option.

            4.2      Method of Exercise. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as

                                        2

<PAGE>

to the Optionee's investment intent with respect to such shares as may be
required pursuant to the provisions of this Option Agreement. The written notice
must be signed by the Optionee and must be delivered in person, by certified or
registered mail, return receipt requested, by confirmed facsimile transmission,
or by such other means as the Company may permit, to the Chief Financial Officer
of the Company, or other authorized representative of the Participating Company
Group, prior to the termination of the Option as set forth in Section 6,
accompanied by full payment of the aggregate Exercise Price for the number of
shares of Stock being purchased. The Option shall be deemed to be exercised upon
receipt by the Company of such written notice and the aggregate Exercise Price.

            4.3      Payment of Exercise Price.

                     (a)     Forms of Consideration Authorized. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Optionee
having a Fair Market Value (as determined by the Company without regard to any
restrictions on transferability applicable to such stock by reason of federal or
state securities laws or agreements with an underwriter for the Company) not
less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise,
as defined in Section 4.3(b), or (iv) by any combination of the foregoing.

                     (b)     Limitations on Forms of Consideration.

                             (i)     Tender of Stock. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.

                             (ii)    Cashless Exercise. A "Cashless Exercise"
means the delivery of a properly executed notice together with irrevocable
instructions to a broker in a form acceptable to the Company providing for the
assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares of Stock acquired upon the exercise of the Option pursuant
to a program or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve or terminate any such
program or procedure.

            4.4      Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax

                                       3

<PAGE>

withholding obligations of the Participating Company Group, if any, which arise
in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired upon exercise of the
Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option. The Company shall have no
obligation to deliver shares of Stock until the tax withholding obligations of
the Participating Company Group have been satisfied by the Optionee.

            4.5      Certificate Registration. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.

            4.6      Restrictions on Grant of the Option and Issuance of Shares.
The grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

            4.7      Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.

     5.     Transferability of the Option.

            An Incentive Stock Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Incentive Stock Option is granted only by
such person. A Nonstatutory Stock Option shall not be transferable in any manner
(including without limitation, sale, alienation, anticipation, pledge,
encumbrance, or assignment) other than, (i) by will or by the laws of descent
and

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distribution, (ii) by written designation of a beneficiary, in a form acceptable
to the Company, with such designation taking effect upon the death of an
Optionee, (iii) by delivering written notice to the Company, in a form
acceptable to the Company (including such representations, warranties and
indemnifications as the Company shall require an Optionee to make to protect the
Company's interests and ensure that this Nonstatutory Stock Option has been
transferred under the circumstances approved by the Company), by gift to an
Optionee's spouse, former spouse, children, stepchildren, grandchildren, parent,
stepparent, grandparent, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, persons having
one of the foregoing types of relationship with an Optionee due to adoption, any
person sharing an Optionee's household (other than a tenant or employee), a
foundation in which these persons or the Optionee control the management of
assets, and any other entity in which these persons (or the Optionee) own more
than fifty percent of the voting interests. A transfer to an entity in which
more than fifty percent of the voting interests are owned by these persons (or
the Optionee) in exchange for an interest in that entity is specifically
included as a permissible type of transfer. In addition, a transfer to a trust
created solely for the benefit (i.e., an Optionee and/or any or all of the
foregoing persons hold more than 50 percent of the beneficial interest in the
trust) of an Optionee and/or any or all of the foregoing persons is also a
permissible transferee, or (iv) such other transferees as may be authorized by
the Board in its sole and absolute discretion. During an Optionee's life this
Nonstatutory Stock Option is exercisable only by the Optionee or a transferee
satisfying the above conditions. Except in the event of an Optionee's death,
upon transfer of a Nonstatutory Stock Option to any or all of the foregoing
persons, the Optionee is liable for any and all taxes due upon exercise of those
transferred Nonstatutory Stock Options. At no time will a transferee who is
considered an affiliate under Rule 144(a)(1) be able to sell any or all such
Stock without complying with Rule 144. The right of a transferee to exercise the
transferred portion of this Nonstatutory Stock Option shall terminate in
accordance with the Optionee's right of exercise under this Nonstatutory Stock
Option and is further subject to such representations, warranties and
indemnifications from the transferee that the Company requires the transferee to
make to protect the Company's interests and ensure that this Nonstatutory Stock
Option has been transferred under the circumstances approved by the Company.
Once a portion of a Nonstatutory Stock Option is transferred, no further
transfer may be made of that portion of the Nonstatutory Stock Option.

     6.     Termination of the Option.

            The Option shall terminate and may no longer be exercised on the
first to occur of (a) the Option Expiration Date, (b) the last date for
exercising the Option following termination of the Optionee's Service as
described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.

     7.     Effect of Termination of Service.

            7.1      Option Exercisability.

                     (a)     Disability. If the Optionee's Service with the
Participating Company Group terminates because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior

                                       5

<PAGE>

to the expiration of twelve (12) months after the date on which the Optionee's
Service terminated, but in any event no later than the Option Expiration Date.

                     (b)     Death. If the Optionee's Service with the
Participating Company Group terminates because of the death of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the Optionee's legal
representative or other person who acquired the right to exercise the Option by
reason of the Optionee's death at any time prior to the expiration of twelve
(12) months after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date. The Optionee's Service shall
be deemed to have terminated on account of death if the Optionee dies within
three (3) months after the Optionee's termination of Service.

                     (c)     Other Termination of Service. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee at any time prior to the expiration of three (3)
months (or such other longer period of time as determined by the Board, in its
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.

            7.2      Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

            7.3      Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 7.1 of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

     8.     Change in Control.

            In the event of a Change in Control, the Acquiring Corporation may
either assume the Company's rights and obligations under the Option or
substitute for the Option a substantially equivalent option for the Acquiring
Corporation's stock. The Option shall terminate and cease to be outstanding
effective as of the date of the Change in Control to the extent that the Option
is neither assumed or substituted for by the Acquiring Corporation in connection
with the Change in Control nor exercised as of the date of the Change in
Control. Notwithstanding the foregoing, shares acquired upon exercise of the
Option prior to the Change in Control and any consideration received pursuant to
the Change in Control with respect to such shares shall continue to be subject
to all applicable provisions of this Option Agreement except as otherwise
provided herein.

                                       6

<PAGE>

     9.     Adjustments for Changes in Capital Structure.

            In the event of any stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification, or similar change in the
capital structure of the Company, appropriate adjustments shall be made in the
number, Exercise Price and class of shares of stock subject to the Option. If a
majority of the shares which are of the same class as the shares that are
subject to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to an Ownership Change Event) shares of another
corporation (the "New Shares"), the Board may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be adjusted
in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this Section 9 shall be rounded down to the nearest whole number,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.

     10.    Rights as a Stockholder, Employee or Consultant.

            The Optionee shall have no rights as a stockholder with respect to
any shares covered by the Option until the date of the issuance of a certificate
for the shares for which the Option has been exercised (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 9. If the Optionee is an Employee, the
Optionee understands and acknowledges that, except as otherwise provided in a
separate, written employment agreement between a Participating Company and the
Optionee, the Optionee's employment is "at will" and is for no specified term.
Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's Service
as an Employee or Consultant, as the case may be, at any time.

     11.    Notice of Sales Upon Disqualifying Disposition.

            The Optionee shall dispose of the shares acquired pursuant to the
Option only in accordance with the provisions of this Option Agreement. In
addition, if the Notice designates this Option as an Incentive Stock Option, the
Optionee shall (a) promptly notify the Chief Financial Officer of the Company if
the Optionee disposes of any of the shares acquired pursuant to the Option
within one (1) year after the date the Optionee exercises all or part of the
Option or within two (2) years after the Date of Option Grant and (b) provide
the Company with a description of the circumstances of such disposition. Until
such time as the Optionee disposes of such shares in a manner consistent with
the provisions of this Option Agreement, unless otherwise expressly authorized
by the Company, the Optionee shall hold all shares acquired pursuant to the
Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after the exercise of the Option and the two-year
period immediately after Date of Option Grant. At any time during the one-year
or two-year periods set forth above, the Company may place a legend on any
certificate representing shares acquired pursuant to the

                                       7

<PAGE>

Option requesting the transfer agent for the Company's stock to notify the
Company of any such transfers. The obligation of the Optionee to notify the
Company of any such transfer shall continue notwithstanding that a legend has
been placed on the certificate pursuant to the preceding sentence.

     12.    Legends.

            The Company may at any time place legends referencing any applicable
federal, state or foreign securities law restrictions, and, if applicable, that
the shares were acquired upon exercise of an Incentive Stock Option on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section.

     13.    Lock-up Agreement.

            The Optionee hereby agrees that in the event of any underwritten
public offering of stock, including an initial public offering of stock, made by
the Company pursuant to an effective registration statement filed under the
Securities Act, the Optionee shall not offer, sell, contract to sell, pledge,
hypothecate, grant any option to purchase or make any short sale of, or
otherwise dispose of any shares of stock of the Company or any rights to acquire
stock of the Company for such period of time from and after the effective date
of such registration statement as may be established by the underwriter for such
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act.

     14.    Restrictions on Transfer of Shares.

            No shares acquired upon exercise of the Option may be sold,
exchanged, transferred (including, without limitation, any transfer to a nominee
or agent of the Optionee), assigned, pledged, hypothecated or otherwise disposed
of, including by operation of law, in any manner which violates any of the
provisions of this Option Agreement, and any such attempted disposition shall be
void. The Company shall not be required (a) to transfer on its books any shares
which will have been transferred in violation of any of the provisions set forth
in this Option Agreement or (b) to treat as owner of such shares or to accord
the right to vote as such owner or to pay dividends to any transferee to whom
such shares will have been so transferred.

     15.    Miscellaneous Provisions.

            15.1     Binding Effect. Subject to the restrictions on transfer set
forth herein, this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

            15.2     Termination or Amendment. The Board may terminate or amend
the Plan or the Option at any time; provided, however, that except as provided
in Section 8 in connection with a Change in Control, no such termination or
amendment may adversely affect

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<PAGE>

the Option or any unexercised portion hereof without the consent of the Optionee
unless such termination or amendment is necessary to comply with any applicable
law or government regulation or is required to enable the Option, if designated
an Incentive Stock Option in the Notice, to qualify as an Incentive Stock
Option. No amendment or addition to this Option Agreement shall be effective
unless in writing.

            15.3     Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given (except to the extent
that this Option Agreement provides for effectiveness only upon actual receipt
of such notice) upon personal delivery or upon deposit in the United States Post
Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party's signature
on the Notice or at such other address as such party may designate in writing
from time to time to the other party.

            15.4     Integrated Agreement. The Notice, this Option Agreement and
the Plan constitute the entire understanding and agreement of the Optionee and
the Participating Company Group with respect to the subject matter contained
herein or therein and supersedes any prior agreements, understandings,
restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those
as set forth or provided for herein or therein. To the extent contemplated
herein or therein, the provisions of the Notice and the Option Agreement shall
survive any exercise of the Option and shall remain in full force and effect.

            15.5     Applicable Law. This Option Agreement shall be governed by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
the State of California.

            15.6     Counterparts. The Notice may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

                                       9

<PAGE>

(TM) Incentive Stock Option                  Optionee: _________________________

(TM) Nonstatutory Stock Option
                                                    Date: ______________________


                          STOCK OPTION EXERCISE NOTICE

Accredited Home Lenders Holding Co.
Attention: Chief Financial Officer
15030 Avenue of Science, Suite 100
San Diego, CA 92128

Ladies and Gentlemen:

     1.     Option. I was granted an option (the "Option") to purchase shares
of the common stock (the "Shares") of Accredited Home Lenders Holding Co. (the
"Company") pursuant to the Company's 2002 Stock Option Plan (the "Plan"), my
Notice of Grant of Stock Option (the "Notice") and my Stock Option Agreement
(the "Option Agreement") as follows:

            Grant Number:                             __________________________

            Date of Option Grant:                     __________________________

            Number of Option Shares:                  __________________________

            Exercise Price per Share:                 $ ________________________

     2.     Exercise of Option. I hereby elect to exercise the Option to
purchase the following number of Shares:

            Total Shares Purchased:                   __________________________

            Total Exercise Price (Total Shares  X
            Price per Share)                          $ ________________________

     3.     Payments. I enclose payment in full of the total exercise price for
the Shares in the following form(s), as authorized by my Option Agreement:

            (TM) Cash:                                $ ________________________

            (TM) Check:                               $ ________________________

            (TM) Tender of Company Stock:             Contact Plan Administrator

            (TM) Cashless exercise                    Contact Plan Administrator

     4.     Tax Withholding. Subject to the Option Agreement, I authorize
payroll withholding and otherwise will make adequate provision for the federal,
state, local and foreign tax withholding obligations of the Company, if any, in
connection with the Option.

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<PAGE>

     5.     Optionee Information.

            My address is: _____________________________________________________

                           _____________________________________________________

            My Social Security Number is: ______________________________________

     6.     Notice of Disqualifying Disposition. If the Option is an Incentive
Stock Option, I agree that I will promptly notify the Chief Financial Officer of
the Company if I transfer any of the Shares within one (1) year from the date I
exercise all or part of the Option or within two (2) years of the Date of Option
Grant.

     7.     Binding Effect. I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, to all of which I hereby expressly assent. This Agreement
shall inure to the benefit of and be binding upon the my heirs, executors,
administrators, successors and assigns.

     I understand that I am purchasing the Shares pursuant to the terms of the
Plan, the Notice and my Option Agreement, copies of which I have received and
carefully read and understand.

                                     Very truly yours,

                                     ___________________________________________
                                     (Signature)

Receipt of the above is hereby acknowledged.

ACCREDITED HOME LENDERS HOLDING CO.

By: _____________________________

Title: __________________________

Dated: __________________________

                                       2