Document:

Exhibit 10.1

December 29, 2006

Richard DeYoung
Address omitted

Dear Richard,

It is my pleasure to send you this letter as a formal offer of employment with
BSML, Inc. (the “Company”) for the position of Vice President and
Chief Financial Officer. The following are the specifics of the
offer.

	
  
Position
  	
  
Vice President and Chief Financial Officer
  
	
  
 
  	
  
 
  
	
  
Location
  	
  
BSML’s Corporate Office, Walnut Creek, CA
  
	
  
 
  	
  
 
  
	
  
Reporting
  	
  
CEO, BSML, Inc.
  
	
  
 
  	
  
 
  
	
  Start Date
  	
  
On or before February 5, 2007 (and in no event later than February 23,
2007)
 

Responsibilities

	
  
•
  	
  
Ensure from a financial perspective the Company’s capacity to successfully
operate its on-going and future business model in accordance with the strategic
plan.
 
	
  
 
  	
  
 
  
	
  
•
  	
  
Provide accurate and timely reports, budgets and forecasts and other financial
data, as well as the analysis of financial results, reports, budgets and
forecasts to line management.
 
	
  
 
  	
  
 
  
	
  
•
  	
  
Provide accurate financial reports and forecasts of the Company’s direct
costs and allocated costs by operating unit.
 
	
  
 
  	
  
 
  
	
  •
  	
  
Ensure the appropriateness and maintenance of financial control policies and
procedures.
 
	
  
 
  	
  
 
  
	
  
•
  	
  
Establish accounting systems, procedures and governance so that accounting
records provide accurate and timely information in accordance with Generally
Accepted Accounting Principles and in compliance with federal, state and
international tax and legal jurisdictions, SEC regulations (including
Sarbanes-Oxley), and NASDAQ listing requirements.
 
	
  
 
  	
  
 
  
	
  
•
  	
  
Provide the financial format and leadership for business planning, including the
selection of financial measurements or drivers to be used to evaluate Company
performance.
 
	
  
 
  	
  
 
  
	
  
•
  	
  
Develop a financial staff that meets the needs of the organization.

-2-

	
  
•
  	
  
Develop an annual budgeting procedure including update procedures.

	
  
 
  	
  
 
  
	
  
•
  	
  
Develop commercial banking relationships and, in conjunction with the President,
investor and investment community relationships to meet the company’s
future capital needs and equity market strategy.
 
	
  
 
  	
  
 
  
	
  
•
  	
  
Perform any additional duties and assignments, as   deemed necessary by the President, CEO, or Board of Directors.
  

Compensation

	
  
1.
  	
  
Base Salary
  
	
   
  	
  
 
  	
  
 
  
	
  
 
  	
  
•
  	
  
$190,000 per year paid in 26 equal installments per BSML’s payroll
schedule.
 
	
  
 
  	
  
 
  	
  
 
  
	
  
2.
  	
  
Bonus
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
•
  	
  
You will be eligible to participate in the Corporate Incentive Plan.

	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
•
  	
  
Currently, under the Corporate Incentive Plan, your cash bonus will be equal to
1% of BSML’s actual consolidated annual EBITDA (Earnings before interest,
tax, depreciation, and amortization) for each fiscal year in which you are
employed for the entire fiscal year. The bonus is currently planned to be paid
annually, promptly after the end of the applicable fiscal year and after the
results for the year have been finalized. The terms and conditions of this
Corporate Incentive Plan for future years are subject to change at the
discretion of the Board of Directors.
 

Termination without Cause

If your employment is terminated without cause during the first 12 months of
your employment, you will be entitled to 3 months of base salary as severance
pay, payable monthly. If your service with BSML is between one year and two
years, and if you are terminated without cause, you will be entitled to 4.5
months of base salary as severance pay, payable monthly.  If your service
with BSML is two years or greater, and if you are terminated without cause, you
will be entitled to 6 months of base salary as severance pay, payable monthly.
Further, if you are terminated without cause within 6 months of a change of
ownership control of BSML, you will be entitled to 6 months of base salary as
severance, payable monthly, without regard to term of service.  You will
not be eligible for any other severance consideration for termination without
cause or in respect of a change of control, except as set forth above, and you
will receive no severance consideration if you are terminated with cause. 
For purposes of this agreement, “with cause” shall mean termination as
a result of or caused by theft or embezzlement from the company, the
unauthorized disclosure of confidential information of the company, willful
misconduct or dishonesty or conviction of or failure to contest prosecution for
a felony or a crime of moral turpitude, stealing trade secrets or intellectual
property owned by the company, or any act in competition with the company.

-3-

Confidentiality/Sole Endeavor

BSML shall be your sole full-time employment.   Any know-how,
intellectual property, patents, licenses or business ideas related to
BSML’s business conceived by you during the term of your employment will be
owned by BSML.  You agree to keep confidential all company documents,
technology, business ideas and all other company proprietary information. 
You will sign and deliver to the Company on the first day of your employment the
Company’s standard employee invention and non-disclosure
agreement.

Indemnification

BSML shall indemnify you for any claims and actions that might be brought
against you as an officer of the company to the fullest extent permitted in the
Company’s by-laws and D&O policy.

Additional Considerations

You will be eligible for the corporate health and benefit plan, including
medical, dental and vision insurance. Your employment will be “at
will”, as defined by the laws of the State of California. 

Although we do not anticipate any disputes between you and BSML, we will handle
any controversy arising out of your employment or the termination of your
employment through the Company’s Dispute Resolution Policy.  The
Company’s Dispute Resolution Policy is comprised of a mediation process,
and arbitration when necessary. 

We sincerely look forward to you joining BSML and anticipate that you will make
a significant contribution to the future success of the Company. Please sign
below as your acceptance of this offer of employment by no later than Friday,
December 29, 2006.

Sincerely,

	
  

  	
  
 
  	
  
 
  
	
  
Julian Feneley
  	
  
 
  	
  
 
  
	
  CEO, BSML, Inc.
  	
  
 
  	
  
 
  

Accepted, with target start date of:    February 5,
2007

-4-

	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  

  	
  
 
  	
  

  	
  
 
  
	
  Richard DeYoung
  	
   
  	
  DateEX-10.1

Exhibit 10.1

EXECUTION

FIFTH AMENDMENT TO

SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT

GOVERNING PURCHASES AND SALES OF MORTGAGE LOANS

This Fifth Amendment, dated as of January 26, 2007 (this “Amendment”), to the Second
Amended and Restated Master Repurchase Agreement Governing Purchases and Sales of Mortgage Loans,
dated as of December 29, 2004 and amended as of December 28, 2005, October 31, 2006 and December
19, 2006 and further amended as of December 27, 2006 (as amended, the “Repurchase
Agreement”), is made by and among LEHMAN BROTHERS BANK, FSB (“Buyer”), FIELDSTONE
INVESTMENT CORPORATION (“FIC”) and FIELDSTONE MORTGAGE COMPANY (“FMC”) (FIC and FMC
shall be individually and collectively referred to as “Seller”). Buyer, FMC and FIC may be
collectively referred to herein as the “Parties”.

RECITALS

WHEREAS, pursuant to the Repurchase Agreement, Buyer has agreed, subject to the terms and
conditions set forth in the Repurchase Agreement, to purchase certain Mortgage Loans owned by
Seller, including, without limitation, all rights of Seller to service and administer such Mortgage
Loans; and

WHEREAS, the Parties desire to amend the Repurchase Agreement as set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree as follows:

Section 1. Definitions. Capitalized terms used but not otherwise defined herein have
the meanings given them in the Repurchase Agreement.

Section 2. Amendments to Repurchase Agreement. Subject to Section 4 hereof, the
Repurchase Agreement shall be amended as follows:

(a) References in the Repurchase Agreement to “this Agreement” or words of similar import
(including indirect references to the Repurchase Agreement) shall, without limitation, be deemed to
be references to the Repurchase Agreement as amended by this Amendment.

(b) The term of the Repurchase Agreement shall be renewed for a period of 364 days from the
date of this Amendment, until January 25, 2008, or such earlier date on which all Purchased
Mortgage Loans are required to be immediately repurchased pursuant to Section 14(a) of the
Repurchase Agreement (unless such date is extended upon mutual agreement of Buyer and Seller).
Thus, the definition of “Final Repurchase Date” shall be amended in accordance with such renewal
term.

(c) The definition of “Change of Control” contained in Section 2 is hereby deleted in its
entirety and replaced with the following:

“Change of Control” shall mean the following: (a) any transaction or event
as a result of which FIC ceases to own, directly or indirectly, 100% of the stock of
FMC, (b) the sale, transfer or other disposition of all or substantially all of a
Seller’s assets (excluding any such action taken in connection with any
securitization transaction in the ordinary course of business), (c) the consummation
of a merger or consolidation of FIC with or into another entity or any other
corporation reorganization, if more than 50.1% of the combined voting power of the
continuing or surviving entity’s stock outstanding immediately after such merger,
consolidation or such other reorganization is owned by Persons who were not
stockholders of FIC immediately prior to such merger, consolidation or other
reorganization, (d) any Person shall have succeeded in having so many of such
Person’s nominees elected to the board of directors of FIC that such nominees, when
added to any existing directors remaining on the board of directors of FIC after
such election who were previously nominated by or are Affiliates of such Person,
comprise a majority of the board of directors of FIC or (e) (i) Michael J.
Sonnenfeld shall cease to be, and to continuously perform the duties of, President
and Chief Executive Officer of FIC and (ii) no successor satisfactory to Buyer, in
its discretion, shall have become, and shall have commenced to perform the duties
of, President and Chief Executive Officer of FIC within sixty (60) days after such
cessation.

(d) The definition of “Collateral Maintenance Percentage” contained in Section 2 is hereby
deleted in its entirety and replaced with the following:

“Collateral Maintenance Percentage” means the amount set forth in the
related Confirmation with respect to each Mortgage Loan which, (1) in determining
whether a Market Value Collateral Deficit exists pursuant to the second sentence of
Section 4(a) hereof shall, for each type of Mortgage Loan set forth in the first
column below, equal the applicable percentage set forth in the second column below
and (2) in determining whether a Securitization Value Collateral Deficit exists
pursuant to the third sentence of Section 4(a) hereof shall, for each type of
Mortgage Loan set forth in the first column below, equal the applicable percentage
set forth in the third column below:

	 	 	 	 	 	 	 	 	 
	 
	 	% for Market Value	 	% for Securitization Value
	Mortgage Loan Type
	 	Collateral Deficit
	 	Collateral Deficit

	 
	 	 	 	 	 	 	 	 
	(a) first lien
High Purchase Price
Mortgage Loans that
are Three Month Aged
Mortgage Loans
	 	 	103.1	%	 	 	103.1	%
	 
	 	 	 	 	 	 	 	 
	(b) first lien High
Purchase Price
Mortgage Loans that
are Five Month Aged
Mortgage Loans
	 	 	104.2	%	 	 	104.2	%
	 
	 	 	 	 	 	 	 	 
	(c) second lien High
Purchase Price
Mortgage Loans
	 	 	106.4	%	 	 	106.4	%
	 
	 	 	 	 	 	 	 	 
	(d) first lien Medium
Purchase Price
Mortgage Loans that
are Three Month Aged
Mortgage Loans
	 	 	105.3	%	 	 	105.3	%
	 
	 	 	 	 	 	 	 	 
	(e) first lien Medium
Purchase Price
Mortgage Loans that
are Five Month Aged
Mortgage Loans
	 	 	106.4	%	 	 	106.4	%
	 
	 	 	 	 	 	 	 	 
	(f) second lien Medium
Purchase Price
Mortgage Loans
	 	 	108.7	%	 	 	108.7	%
	 
	 	 	 	 	 	 	 	 
	(g) first lien Low
Purchase Price
Mortgage Loans that
are Three Month Aged
Mortgage Loans
	 	 	107.5	%	 	 	107.5	%
	 
	 	 	 	 	 	 	 	 
	(h) first lien Low
Purchase Price
Mortgage Loans that
are Five Month Aged
Mortgage Loans
	 	 	108.7	%	 	 	108.7	%
	 
	 	 	 	 	 	 	 	 
	(i) second lien Low
Purchase Price
Mortgage Loans
	 	 	111.1	%	 	 	111.1	%
	 
	 	 	 	 	 	 	 	 
	(j) Mortgage Loans
Delinquent 30-59 days
in excess of 3.0% of
the Total Facility
Amount
	 	 	117.6	%	 	 	117.6	%
	 
	 	 	 	 	 	 	 	 

(e) The definition of “Market Value” contained in Section 2 is hereby amended by deleting
clause (iv) of such definition in its entirety and replacing it with the following:

(iv) any Mortgage Loan that is Delinquent for thirty (30) or more days but not more
than fifty-nine (59) days which, when added with all other Purchased Mortgage Loans
subject to then outstanding Transactions that are Delinquent for such period, would
cause the aggregate Repurchase Price of such Purchased Mortgage Loans subject to then
outstanding Transactions that are Delinquent for such period to exceed 6.0% of the
Total Facility Amount,

(f) The definition of “Purchase Price” contained in Section 2 is hereby deleted in its
entirety and replaced with the following:

“Purchase Price” means on each Purchase Date, the price at which each
Purchased Mortgage Loan is transferred by the applicable Seller to Buyer or its
designee (including Custodian) that shall be equal to for each type of Mortgage Loan
set forth in the first column below, the lowest of: (i) the product of the Market
Value of such Mortgage Loan and the applicable percentage set forth below under the
column labeled “A”, (ii) the product of the Securitization Value of such Mortgage
Loan and the applicable percentage set forth under the column labeled “B” and (iii)
the product of the outstanding principal balance of such Mortgage Loan and the
applicable percentage set forth below under the column labeled “C”:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	A	 	B	 	C
	 
	 	 	 	 	 	 	 	 	 	% of Outstanding
	Mortgage Loan Type
	 	% of Market Value	 	% of Securitization Value	 	Principal Balance

	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(a) first lien High
Purchase Price
Mortgage Loans that
are Three Month
Aged Mortgage Loans
	 	 	97.0	%	 	 	97.0	%	 	 	98.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(b) first lien High
Purchase Price
Mortgage Loans that
are Five Month Aged
Mortgage Loans
	 	 	96.0	%	 	 	96.0	%	 	 	97.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(c) second lien
High Purchase Price
Mortgage Loans
	 	 	94.0	%	 	 	94.0	%	 	 	95.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(d) first lien
Medium Purchase
Price Mortgage
Loans that are
Three Month Aged
Mortgage Loans
	 	 	95.0	%	 	 	95.0	%	 	 	96.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(e) first lien
Medium Purchase
Price Mortgage
Loans that are Five
Month Aged Mortgage
Loans
	 	 	94.0	%	 	 	94.0	%	 	 	95.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(f) second lien
Medium Purchase
Price Mortgage
Loans
	 	 	92.0	%	 	 	92.0	%	 	 	93.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(g) first lien Low
Purchase Price
Mortgage Loans that
are Three Month
Aged Mortgage Loans
	 	 	93.0	%	 	 	93.0	%	 	 	94.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(h) first lien Low
Purchase Price
Mortgage Loans that
are Five Month Aged
Mortgage Loans
	 	 	92.0	%	 	 	92.0	%	 	 	93.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(i) second lien Low
Purchase Price
Mortgage Loans
	 	 	90.0	%	 	 	90.0	%	 	 	91.5	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	(j) Mortgage Loans
Delinquent 30-59
days in excess of
3.0% of the Total
Facility Amount
	 	 	85.0	%	 	 	85.0	%	 	 	80	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 

(g) Section 3(g) is hereby deleted in its entirety and replaced with the following:

Maximum Facility Amount. With respect to all Transactions hereunder, the
aggregate Purchase Price for all Purchased Mortgage Loans at any one time subject to
then outstanding Transactions shall not exceed FOUR HUNDRED MILLION DOLLARS
($400,000,000) (the “Total Facility Amount”).

(h) Section 11(c) is hereby amended by deleting such Section in its entirety and replacing it
with the following:

(c) (i) liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution), (ii) permit a Change in Control, (iii) change its name, identity,
corporate structure, state of incorporation or taxable status, (iv) change its
principal place of business without thirty (30) days prior written notice to Buyer or
(v) sell, transfer, lease or otherwise dispose of its material property or assets
except that, subject to the limitations set forth above (1) the sale, transfer, lease
or other disposition of property or assets to an unrelated party in the ordinary course
of business and (2) the sale, lease, transfer of property or assets (at fair value)
between Sellers or their Subsidiaries, shall be expressly permitted;

(i) Section 11(k) is hereby amended by deleting such Section in its entirety and replacing it
with the following:

(k) except in the absence of the occurrence and continuance of an Event of Default and
so long as no Event of Default would result from such actions, issue any additional
 shares or classes of Capital Stock (except in connection with convertible securities in
existence as of January 26, 2007 or Seller’s employee equity incentive plan), declare
or pay any dividend or make any other distribution on, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of any shares of any class of
Capital Stock of the Seller or any warrants or options to purchase any such Capital
Stock, whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in obligations
of the Seller; provided, however, that following the occurrence and during the
continuation of any Event of Default, upon the written consent of Buyer, which consent
shall be granted or withheld by Buyer in its sole discretion within one (1) Business
Day of the receipt of a request from the Sellers, the Sellers may make distributions
and dividends in cash or other property but only to the extent of (i) FIC’s
distributable share of FMC’s net taxable income and gain (as determined for federal
income tax purposes) with respect to such taxable year, and only to the extent
reasonably necessary for FIC to satisfy its REIT Distribution Requirement with respect
to such taxable year and (ii) with respect to FIC, distributions and dividends only to
the extent reasonably necessary for FIC to satisfy its REIT Distribution Requirement
with respect to such taxable year;

(j) Section 11(l) is hereby amended by deleting such Section in its entirety and replacing it
with the following:

(l) purchase, lease or otherwise acquire (in a single transaction or a series of
related transactions) the property or assets of any Person (other than purchases or
other acquisitions of inventory, leases, materials, property and equipment in the
ordinary course of business) except pursuant to transaction(s) for which the aggregate
purchase price for the property or assets of such Person does not exceed Twenty-Five
Million Dollars ($25,000,000.00);

(k) Section 11(m) is hereby amended by deleting such Section in its entirety and replacing it
with the following:

(m) create, form or acquire (or permit any Subsidiary to create, form or acquire), any
Subsidiaries or sell, transfer, pledge or otherwise dispose (or permit any Subsidiary
to sell, transfer, pledge or otherwise dispose) of any Capital Stock or other equity
interests in any of their Subsidiaries without providing Buyer with written notice
thereof within ten (10) days following such event;

(l) Section 12(m) is hereby amended by deleting the “Adjusted Tangible Net Worth” covenant
therein in its entirety and replacing it with the following:

	 	 	 
	Adjusted

Tangible

Net Worth

	 	Adjusted Tangible Net Worth shall, at all times, exceed

the greater of (i) $350,000,000 (three-hundred fifty

million dollars) and (ii) the dollar amount set forth in

the most restrictive covenant measuring Adjusted Tangible

Net Worth contained in any agreement between Seller and

any purchaser or lender to whom Seller sells mortgage

loans or obtains financing pursuant to a mortgage loan

repurchase, warehouse lending or similar facility.
	 

	 	 

(m) Section 12(m) is hereby further amended by deleting the “Profitability” financial covenant
therein in its entirety and replacing it with the following:

	 	 	 
	Profitability

	 	During the term of this Agreement, Seller shall not

(i) for the fiscal quarter ending on December 31,

2006, have Net Income of less than negative

$47,000,000 (i.e., a loss of more than $47,000,000)

without regard to unrealized gains or losses from

Hedges during such period and (ii) from and after the

fiscal quarter ending March 31, 2007, have Net Income

of less than $1.00 in any fiscal quarter without

regard to unrealized gains or losses from Hedges

during such period; provided, that, Seller shall

notify Buyer of any such unrealized gains or losses

via the related compliance certificate.
	 

	 	 

(n) Section 13(xii) is hereby amended by changing the reference to “25%” therein to “15%”.

Section 3. Representations and Warranties. Seller hereby represents and warrants to
Buyer that (a) both immediately before and after giving effect to the amendments set forth in
Section 2 of this Amendment, no Event of Default shall have occurred and be continuing, (b) the
representations and warranties of Seller set forth in Section 10 of the Repurchase Agreement are
true and complete as if made on and as of such date and as if each reference in said Section 10 to
“this Agreement” included reference to the Repurchase Agreement as amended hereby, (c) this
Amendment constitutes the legal, valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms and (d) the execution and delivery by Seller of this Amendment has
been duly authorized by all requisite corporate action on the part of Seller and will not violate
any provision of Seller’s organizational documents.

Section 4. Conditions Precedent. The amendments set forth in Section 2 above shall
not become effective unless, on or before January 26, 2007, Buyer shall have received all of the
following documents, each of which shall be satisfactory in form and substance to Buyer and its
counsel:

(a) Amendment. This Amendment, duly completed, executed and delivered by Seller;

(b) Opinion of Counsel. An opinion or opinions of counsel favorable to Buyer with
respect to Seller and this Amendment;

(c) Officer’s Certificate. A certificate of an officer of Seller certifying to such
matters as may be required by Buyer; and

(d) Other Documents. Such other documents as Buyer may reasonably request.

Section 5. Miscellaneous.

(a) Except as expressly amended by Section 2 hereof, the Repurchase Agreement remains
unaltered and in full force and effect. Each of the Parties hereby reaffirms all terms and
covenants made in the Repurchase Agreement as amended hereby.

(b) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver
of any right, power or remedy of any Party under the Repurchase Agreement, or any other document,
instrument or agreement executed and/or delivered in connection therewith.

(c) THIS AMENDMENT SHALL BE CONSTRUED, INTERPRETED AND GOVERNED BY THE LAW OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.

(d) This Amendment may be executed in any number of counterparts, and all such counterparts
shall together constitute the same agreement. Any signature delivered by a party via facsimile
shall be deemed to be an original signature hereto.

[SIGNATURE PAGE TO FOLLOW]

1

IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be executed as of
the day and year first above written.

SELLER:

FIELDSTONE MORTGAGE COMPANY

By: /s/ Mark C. Krebs

Name: Mark C. Krebs

Title: Sr. Vice President & Treasurer

FIELDSTONE INVESTMENT CORPORATION

By: /s/ Mark C. Krebs

Name: Mark C. Krebs

Title: Sr. Vice President & Treasurer

BUYER:

LEHMAN BROTHERS BANK, FSB

By: /s/ Fred C. Madonna

Name: Fred C. Madonna

Title:

2

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