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Case 3:07-cv-00488-H-CAB Document 213 Filed 08/04/2009 Page 1 of 41 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 SOUTHERN DISTRICT OF CALIFORNIA 9 MICHAEL ATLAS and GAIL ATLAS, Case No. 3:07-cv-00488-H-CAB 10 Individually and On Behalf of All Others 11 Similarly Situated, ORDER PRELIMINARILY Plaintiffs APPROVING SETTLEMENT AND 12 PROVIDING FOR NOTICE 13 vs. 14 ACCREDITED HOME LENDERS 15 HOLDING CO.; JAMES KONRATH; JOSEPH J. LYDON; STUART D. MARVIN; 16 JOHN S. BUCHANAN; DAVID E. HERTZEL; and JEFFREY W. CRAWFORD, 17 Defendants. 18 19 20 21 22 23 24 25 26 27 28 07cv488

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Case 3:07-cv-00488-H-CAB Document 213 Filed 08/04/2009 Page 1 of 41

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7UNITED STATES DISTRICT COURT

8SOUTHERN DISTRICT OF CALIFORNIA

9MICHAEL ATLAS and GAIL ATLAS, Case No. 3:07-cv-00488-H-CAB

10 Individually and On Behalf of All Others11 Similarly Situated,

ORDER PRELIMINARILY

PlaintiffsAPPROVING SETTLEMENT AND

12 PROVIDING FOR NOTICE

13 vs.

14 ACCREDITED HOME LENDERS15 HOLDING CO.; JAMES KONRATH;

JOSEPH J. LYDON; STUART D. MARVIN;16 JOHN S. BUCHANAN; DAVID E.

HERTZEL; and JEFFREY W. CRAWFORD,17

Defendants.18

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1 WHEREAS, Lead Plaintiff Arkansas Teacher Retirement System (“Arkansas Teacher”)

2 and plaintiff William F. Kornfeld (“Kornfeld,” together with Arkansas Teachers, “Plaintiffs”),

3 and Accredited Home Lenders Holding Co. (“Accredited” or the “Company”), 1 James Konrath

4 (“Konrath”); Joseph J. Lydon (“Lydon”); John S. Buchanan (“Buchanan”); Stuart D. Marvin

5 (“Marvin”); Jeffrey W. Crawford (“Crawford”); Jody A. Gunderson (“Gunderson”); Richard T.

6 Pratt (“Pratt”); Gary M. Erickson (“Erickson”); Bowers W. Espy (“Espy”); and James H.

7 Berglund (“Berglund”) (collectively, the “Defendants”), have applied to the Court pursuant to

8 Rule 23(e) of the Federal Rules of Civil Procedure for an order approving the settlement of the

9 above-captioned litigation (the “Litigation”) in accordance with the Stipulation of Settlement

10 dated as of June 23, 2009 (the “Stipulation”), which, together with the attached exhibits, sets

11 forth the terms and conditions for a proposed settlement of the Litigation (the “Settlement”) and

12 for dismissal of the Litigation with prejudice as against all of the Released Persons, upon the

13 terms and conditions set forth therein; and the Court having read and considered the Stipulation

14 and the attached exhibits;

15 NOW, THEREFORE, IT IS HEREBY ORDERED:

16 1. This order (the “Notice Order”) incorporates by reference the definitions in the

17 Stipulation, and all terms used herein shall have the same meanings as set forth in the

18 Stipulation. Any inconsistencies between the Stipulation and the Notice of Pendency and

19 Proposed Settlement of Class Action will be controlled by the language of the Stipulation.

20 2. The Court preliminarily approves the Settlement as being fair, just, reasonable

21 and adequate to the Settlement Class, pending a final hearing on the Settlement.

22 CLASS CERTIFICATION

23 3. The Court certifies, for settlement purposes only, pursuant to Rules 23(a) and

24 23(b)(3) of the Federal Rules of Civil Procedure, a Settlement Class defined as follows:

25

26 1 Accredited filed for bankruptcy protection on May 1, 2009. Pursuant to the Stipulation, theSettlement is conditioned on receiving an Order of the Bankruptcy Court (“Bankruptcy Court

27 Approval”) approving, solely to the extent necessary, Accredited’s participation in the28 Settlement, and the use of the proceeds of the Directors’ and Officers’ Liability Insurance

Policies to fund the Settlement Fund.

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1 all persons and entities who purchased or acquired Accredited Securities betweenNovember 1, 2005, through March 12, 2007, inclusive, and who were injured

2 thereby. Excluded from the Settlement Class are Accredited, Berglund,

3 Buchanan, Crawford, Erickson, Espy, Gunderson, Konrath, Lydon, Marvin, and

Pratt; the officers and directors of Accredited at all relevant times; members of

4 their immediate families and their legal representatives, heirs, successors orassigns and any entity in which any Defendant has or had a controlling interest,

5 including the REIT. Also excluded from the Settlement Class are those Personswho timely and validly request exclusion from the Settlement Class pursuant to

6 the Notice of Pendency and Proposed Settlement of Class Action.

7 4. The Court finds, for the purposes of the Settlement only, that the prerequisites for

8 a class action under Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure have been

9 satisfied in that: (a) the number of Settlement Class Members is so numerous that joinder of all

10 members thereof is impracticable; (b) there are questions of law and fact common to the

11 Settlement Class; (c) the claims of the Lead Plaintiff are typical of the claims of the Settlement

12 Class it seeks to represent; (d) Lead Plaintiff has fairly and adequately represented the interests

13 of the Settlement Class; (e) the questions of law and fact common to the members of the

14 Settlement Class predominate over any questions affecting only individual members of the

15 Settlement Class; and (f) a class action is superior to other available methods for the fair and

16 efficient adjudication of the controversy.

17 5. Pursuant to Rule 23 of the Federal Rules of Civil Procedure, and for the purposes

18 of the Settlement only, the Lead Plaintiff is appointed as the Settlement Class Representative and

19 Bernstein Litowitz Berger & Grossmann LLP is appointed as Lead Counsel for the Settlement

20 Class.

21 6. The Court appoints the firm of Garden City Group (“Claims Administrator”) to

22 supervise and administer the notice procedure as well as the processing of claims as more fully

23 set forth below:

24 a. On or before August 28, 2009, the Claims Administrator shall cause a

25 copy of the Notice of Pendency and Proposed Settlement of Class Action (the “Notice”), and the

26 Proof of Claim and Release (the “Claim Form”), attached to this Order as Exhibits A-1 and A-2,

27 to be mailed by first-class mail, postage prepaid, to all members of the Settlement Class at the

28 address of each such Person as set forth in the records of Accredited or its transfer agent, or who

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1 are identified by further reasonable efforts (“Notice Date”);

2 b. A summary notice (“Summary Notice”), attached to this Order as

3 Exhibit A-3, shall be published once in the national edition of The Investor’s Business Daily on

4 or before September 4, 2009; and

5 c. The Notice, Summary Notice and Claim Form shall also be placed on the

6 Claims Administrator’s website, on or before the Notice Date.

7 7. The Court approves the form of Notice and Summary Notice (together, the

8 “Notices”) and Claim Form, and finds that the procedures established for publication, mailing

9 and distribution of such Notices substantially in the manner and form set forth in paragraph 6 of

10 this Order meet the requirements of Rule 23 of the Federal Rules of Civil Procedure and due

11 process, and constitute the best notice practicable under the circumstances.

12 8. As soon as practicable, Defendants shall provide the Claims Administrator with

13 shareholder information to the extent available in the records of Accredited or its transfer agent,

14 providing the identity of all record holders of Accredited Securities. To the extent available in

15 Accredited’s or its transfer agent’s records, this information shall contain the names and

16 addresses of all purchasers of Accredited Securities during the Settlement Class Period, as

17 reflected in Accredited’s or its transfer agent’s records.

18 9. On or before September 16, 2009, Lead Counsel shall cause to be filed with the

19 Clerk of this Court affidavits or declarations of the person or persons under whose general

20 direction the mailing of the Notice and the publication of the Summary Notice shall have been

21 made, showing that such mailing and publication have been made in accordance with this Order.

22 10. Nominees who purchased or otherwise acquired Accredited Securities for

23 beneficial owners who are Settlement Class Members are directed to: (a) request within fourteen

24 (14) days of receipt of the Notice additional copies of the Notice and the Claim Form from the

25 Claims Administrator for such beneficial owners; or (b) send a list of the names and addresses of

26 such beneficial owners to the Claims Administrator within fourteen (14) days after receipt of the

27 Notice. If a nominee elects to send the Notice to beneficial owners, such nominee is directed to

28 mail the Notice within fourteen (14) days of receipt of the copies of the Notice from the Claims

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1 Administrator, and upon such mailing, the nominee shall send a statement to the Claims

2 Administrator confirming that the mailing was made as directed, and the nominee shall retain the

3 list of names and addresses for use in connection with any possible future notice to the

4 Settlement Class. Upon full compliance with this Notice Order, including the timely mailing of

5 Notice to beneficial owners, such nominees may seek reimbursement of their reasonable

6 expenses actually incurred in complying with this Notice Order by providing the Claims

7 Administrator with proper documentation supporting the expenses for which reimbursement is

8 sought and reflecting compliance with these instructions, including timely mailing of the Notice,

9 if the nominee elected or elects to do so. Such properly documented expenses incurred by

10 nominees in compliance with the terms of this Notice Order shall be paid from the Settlement

11 Fund.

12 HEARING: RIGHT TO BE HEARD

13 11. There shall be a hearing on November 2, 2009, at 10:30 a.m. (the “Settlement

14 Hearing”) at which time the Court will address the fairness, reasonableness and adequacy of the

15 Settlement, the fairness and reasonableness of the Plan of Allocation, and Lead Counsel’s

16 application for attorneys’ fees and payment of expenses. The Settlement Hearing will be held

17 before the Honorable Marilyn L. Huff at the United States District Court for the Southern

18 District of California, 940 Front Street, San Diego, CA 92101-8900.

19 12. Papers in support of the Settlement, the Plan of Allocation, and Lead Counsel’s

20 application for attorneys’ fees and payment of expenses shall be submitted on or before

21 September 16, 2009.

22 13. Any member of the Settlement Class may appear at the Settlement Hearing and

23 show cause why the proposed Settlement embodied in the Stipulation should or should not be

24 approved as fair, reasonable and adequate, or why the Judgment should or should not be entered

25 thereon, and/or to present opposition to the Plan of Allocation or to the application of Lead

26 Counsel for attorneys’ fees and payment of litigation expenses. However, no Settlement Class

27 Member or any other Person shall be heard or entitled to contest the approval of the terms and

28 conditions of the Settlement, or, if approved, the Judgment to be entered thereon approving the

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1 same, or the terms of the Plan of Allocation or the application by Lead Counsel for an award of

2 attorneys’ fees and payment of litigation expenses unless that Settlement Class Member or

3 Person (i) has served written objections, including the basis therefor, as well as copies of any

4 papers and/or briefs in support of his, her or its position upon the following counsel for receipt

5 on or before October 13, 2009:

6 David R. Stickney Christopher H. McGrathNiki L. Mendoza Paul, Hastings, Janofsky & Walker LLP

7 Bernstein Litowitz Berger & Grossmann LLP 4747 Executive Drive, 12th Floor12481 High Bluff Drive, Suite 300 San Diego, CA 92121

8 San Diego, CA 92130 Counsel for Individual DefendantsCounsel for Lead Plaintiff

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10 and (ii) filed said objections, papers and briefs with the Clerk of the United States District Court

11 for the Southern District of California. Any Settlement Class Member who does not make his,

12 her or its objection in the manner provided for herein shall be deemed to have waived such

13 objection and shall forever be foreclosed from making any objection to the fairness or adequacy

14 of the Settlement as incorporated in the Stipulation, to the Plan of Allocation or to the application

15 by Lead Counsel for an award of attorneys’ fees and payment of litigation expenses unless

16 otherwise ordered by the Court. The manner in which a notice of objection should be prepared,

17 filed and delivered shall be stated in the Notice.

18 14. All reply papers shall be filed with the Court and served on or before

19 October 23, 2009.

20 15. If approved, all Settlement Class Members will be bound by the proposed

21 Settlement provided for in the Stipulation, and by any judgment or determination of the Court

22 affecting Settlement Class Members, regardless of whether or not a Settlement Class Member

23 submits a Claim Form.

24 16. Any member of the Settlement Class may enter an appearance in the Litigation, at

25 their own expense, individually or through counsel of their own choice. If they do not enter an

26 appearance, they will be represented by Lead Counsel.

27 17. The Court reserves the right to adjourn or continue the Settlement Hearing, or any

28 adjournment or continuance thereof, without any further notice to Settlement Class Members and

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1 to approve the Stipulation with modification and without further notice to Settlement Class

2 Members. The Court retains jurisdiction of this Litigation to consider all further applications

3 arising out of or connected with the proposed Settlement, and as otherwise warranted.

4 CLAIMS PROCESS

5 18. In order to be entitled to participate in the Settlement, a Settlement Class Member

6 must complete and submit a Claim Form in accordance with the instructions contained therein.

7 To be valid and accepted, Claim Forms submitted in connection with this Settlement must be

8 postmarked on or before November 17, 2009.

9 19. Any Settlement Class Member who does not timely submit a valid Claim Form

10 shall not be entitled to share in the Settlement Fund, unless otherwise ordered by the Court, but

11 nonetheless shall be barred and enjoined from asserting any of the Released Claims and shall be

12 bound by any judgment or determination of the Court affecting the Settlement Class Members.

13 Notwithstanding the foregoing, Lead Counsel shall have the discretion to accept late-submitted

14 claims for processing by the Claims Administrator so long as distribution of the Net Settlement

15 Fund is not materially delayed.

16 REQUEST FOR EXCLUSION FROM THE CLASS

17 20. Any requests for exclusion must be submitted on or before October 13, 2009.

18 Any Person who wishes to be excluded from the Settlement Class must provide (a) the name,

19 address and telephone number of the Person requesting exclusion; (b) the Person’s transactions

20 in Accredited Securities during the Settlement Class Period, including the dates, the number of

21 securities purchased or acquired, the date of each purchase, acquisition or sale and the price paid

22 and/or received; and (c) that the Person wishes to be excluded from the Settlement Class. Within

23 seven (7) calendar days of receipt by Lead Counsel or the Claims Administrator of any request

24 for exclusion and in no event later than fourteen (14) calendar days before the Settlement

25 Hearing, copies of all such requests for exclusion shall be provided to counsel for Defendants.

26 All Persons who submit valid and timely requests for exclusion in the manner set forth in this

27 paragraph shall have no rights under the Stipulation, shall not share in the distribution of the Net

28 Settlement Fund, and shall not be bound by the Stipulation or any final judgment.

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1 21. Released Persons shall have no responsibility or liability whatsoever with respect

2 to the Plan of Allocation or Lead Counsel’s application for an award of attorneys’ fees and

3 payment of litigation expenses. The Plan of Allocation and Lead Counsel’s application for an

4 award of attorneys’ fees and payment of litigation expenses will be considered separately from

5 the fairness, reasonableness and adequacy of the Settlement. At or after the Settlement Hearing,

6 the Court will determine whether Lead Counsel’s proposed Plan of Allocation should be

7 approved, and the amount of attorneys’ fees and litigation expenses to be awarded to Lead

8 Counsel. Any appeal from any orders relating to the Plan of Allocation or Lead Counsel’s

9 application for an award of attorneys’ fees and litigation expenses, or reversal or modification

10 thereof, shall not operate to terminate or cancel the Settlement, or affect or delay the finality of

11 the Judgment approving the Settlement and the settlement of the Litigation set forth therein.

12 22. Only Settlement Class Members and Lead Counsel shall have any right to any

13 portion of, or any rights in the distribution of, the Settlement Fund unless otherwise ordered by

14 the Court or otherwise provided in the Stipulation.

15 23. All funds held by the Escrow Agent shall be deemed and considered to be in

16 custodia legis and shall remain subject to the jurisdiction of the Court until such time as such

17 funds shall be distributed pursuant to the Stipulation and/or further order of the Court.

18 24. As set forth in the Stipulation, immediately after payment of the Settlement Fund

19 to the Escrow Agent, and without further order of the Court, Lead Counsel may direct payment

20 from the Escrow Account for the actual costs incurred in connection with providing notice to the

21 Settlement Class, locating Settlement Class Members, soliciting claims, assisting with the filing

22 of claims, administering and distributing the Settlement Fund to Authorized Claimants,

23 processing Proof of Claim and Release forms, and paying taxes, escrow fees and costs, if any. In

24 the event the Court does not approve the Settlement, or it otherwise fails to become effective,

25 neither Lead Plaintiff nor Lead Counsel shall have any obligation to repay any amounts actually

26 and properly incurred or disbursed for such purposes.

27 25. Neither the Stipulation, nor any of its terms or provisions, nor any of the

28 negotiations or proceedings connected with it, nor any act performed nor document executed

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1 pursuant to or in furtherance of it (a) is or may be deemed to be or may be used as an admission

2 of, or evidence of, the validity of any Released Claim, or of any wrongdoing, fault, or liability of

3 the Parties or the Released Persons; or (b) is or may be deemed to be or may be used as an

4 admission of, or evidence of, any wrongdoing, fault, or liability of any of the Parties or the

5 Released Persons in any civil, criminal or administrative proceeding in any court, administrative

6 agency or other tribunal.

7 26. There shall be no distribution of any of the Net Settlement Fund to any Settlement

8 Class Member until a plan of allocation is finally approved and is affirmed on appeal or

9 certiorari or is no longer subject to review by appeal or certiorari and the time for any petition

10 for rehearing, appeal, or review, whether by certiorari or otherwise, has expired.

11 IT IS SO ORDERED.

12 DATED: August 4, 2009

ANN L. HUFF13 UNITED STATES DISTRICT COURT JUDGE

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7UNITED STATES DISTRICT COURT

8SOUTHERN DISTRICT OF CALIFORNIA

9MICHAEL ATLAS and GAIL ATLAS, Case No. 3:07-cv-00488-H-CAB

10 Individually and On Behalf of All Others11 Similarly Situated,

NOTICE OF PENDENCY AND

12 Plaintiffs,PROPOSED SETTLEMENT OF CLASS

EXHIBIT A-113 vs.

14 ACCREDITED HOME LENDERS15 HOLDING CO.; JAMES KONRATH;

JOSEPH J. LYDON; STUART D. MARVIN;16 JOHN S. BUCHANAN; DAVID E.

HERTZEL; and JEFFREY W. CRAWFORD,17

Defendants.18

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UNITED STATES DISTRICT COURT1 SOUTHERN DISTRICT OF CALIFORNIA

2 Atlas vs. Accredited Home Lenders Holding Co.

3 Case No. 3:07-cv-00488-H-CAB

4 NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION

5 A federal court authorized this notice. This is not a solicitation from a lawyer.

6 NOTICE OF PENDENCY OF CLASS ACTION: Please be advised that your rights may be7 affected by a class action lawsuit pending in the United States District Court for the Southern

District of California, Case No. 07-00488 (the “Litigation”), if, during the period from November 1,8 2005, through and including March 12, 2007, you purchased or acquired Accredited Home Lenders

Holding Co. (“Accredited”) Securities and were damaged thereby. 1

9

10 NOTICE OF SETTLEMENT: Please be advised that the Court-appointed Lead Plaintiff ArkansasTeacher Retirement System (“Lead Plaintiff”) and plaintiff William F. Kornfeld (“Kornfeld”) (together

11 with Lead Plaintiff, “Plaintiffs”), on behalf of the Settlement Class (as defined in paragraph 1 below),have reached a proposed settlement of the Litigation with Defendants Accredited, James Konrath, Joseph

12 J. Lydon, John S. Buchanan, Stuart D. Marvin, Jeffrey W. Crawford, Jody A. Gunderson, Richard T.Pratt, Gary M. Erickson, Bowers W. Espy, and James H. Berglund (the “Individual Defendants,”

13 collectively with Accredited, “Defendants”), for a total of $22 million in cash that will resolve all claimsin the Litigation.

14This Notice explains important rights and options you may have, and the deadlines for exercising

15 them, including the possible receipt of cash from the Settlement. Your legal rights will be affectedwhether or not you act. Please read this Notice carefully!

16The Court in charge of this case still has to decide whether to approve the settlement. Payments will be

17 made if the Court approves the settlement and after potential appeals are resolved. Please be patient.

18 1. Description of the Litigation and Settlement Class: The Litigation alleges that investorspurchased or acquired the common stock or preferred shares of Accredited (“Accredited Securities”) at

19 allegedly artificially inflated prices as a result of Defendants’ dissemination of allegedly materially falseand misleading statements. The proposed settlement, if approved by the Court, will resolve all claims and

20 potential claims of Settlement Class Members against the Defendants and the other Related Parties in the

21 Litigation by all persons and entities who purchased or acquired Accredited Securities between November1, 2005, and March 12, 2007, inclusive (the “Settlement Class Period”), and who were damaged thereby

22 (the “Settlement Class”), except for certain persons and entities who are excluded from the SettlementClass (see paragraph 6 below entitled “Are there exceptions to being included in the Settlement Class?”).

23 2. Statement of Settlement Class’s Recovery: Subject to Court approval, and as described more

24 fully in paragraphs 8-9 below, Plaintiffs on behalf of the Settlement Class, have agreed to settle all claimsthat were asserted in the Complaint or could have been asserted in any forum that arise out of or are based

25 upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, setforth, or referred to in the Complaint and that relate to the purchase or acquisition of Accredited Securities

26 1 All capitalized terms not otherwise defined in this document shall have the meaning provided in the Stipulation of

27 Settlement dated as of June 23, 2009 (“Stipulation”).

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during the Settlement Class Period, in exchange for a settlement payment of $22,000,000 in cash (the1 “Settlement Amount”) to be deposited into an interest-bearing escrow account (the “Settlement Fund”).

2 The Net Settlement Fund (the Settlement Fund less taxes, notice and administration costs and attorneyfees and expenses) will be distributed in accordance with a Plan of Allocation that is described herein

3 subject to Court approval that will determine how the Net Settlement Fund shall be allocated to membersof the Settlement Class.

4

3. Statement of Average Amount of Recovery Per Share:

5 The Settlement Fund consists of twenty-two million dollars ($22,000,000) plus interest earned. Your

6 recovery will depend on the number and type of Accredited Securities you purchased or acquired, and thetiming of those transactions. It will also depend on the number of valid claim forms that members of the

7 Settlement Class submit and the amount of such claims. Assuming that all of the investors whopurchased or acquired Accredited Securities during the Settlement Class Period and suffered damages

8 participate in this settlement, Lead Counsel estimates that the estimated average distribution will beapproximately: $0.34 per share of Accredited common stock; and $0.24 per preferred share before the

9 deduction of court-approved fees and expenses as described in Questions 8 and 17 below and the cost ofnotice and claims administration. Historically, less than all eligible investors submit claims, resulting in

10 higher average distributions per share.

11 Defendants disagree with Plaintiffs on the potential liability of Defendants and on the average amount ofdamages per share, if any, that would be recoverable if Plaintiffs were to prevail on each claim alleged.

12 Defendants deny that they are liable in any respect or that Plaintiffs or other Settlement Class Memberssuffered any injury. The issues on which the parties disagree include, but are not limited to: (1) whether

13 the statements made or facts allegedly omitted were material, false, misleading, or whether theDefendants are otherwise liable under the securities laws for those statements or omissions; (2) the

14 amount by which the prices of Accredited Securities were allegedly artificially inflated (if at all) duringthe Settlement Class Period; and (3) the effect of various market forces influencing the trading prices of

15 Accredited Securities at various times during the Settlement Class Period.

16 4. Statement of Attorneys’ Fees and Expenses:

17 Lead Counsel Bernstein Litowitz Berger & Grossmann LLP will apply to the Court for an award of

18 attorneys’ fees in an amount not to exceed 25% of the Settlement Fund net of Court-approved expenses.In addition, Lead Counsel will apply for the reimbursement of litigation expenses paid or incurred in

19 connection with the prosecution and resolution of the claims in this Litigation, in an amount not to exceed$750,000. If the Court approves Lead Counsel’s fee and expense application, the average cost per share

20 of common stock will be approximately $0.01, and the average cost per share of preferred stock will beapproximately $0.01. These litigation expenses, if approved, will come out of the Settlement Fund.

21Settlement Class Members are not personally liable for any such fees or expenses. To date, Lead Counsel

22 has not received any payment for its services in conducting the Litigation nor has counsel been paid fortheir expenses incurred. Plaintiff Kornfeld also intends to apply to the Court for an award of a service

23 award not to exceed $5,000.

24 5. Identification of Attorney Representatives:

25 Lead Plaintiff and the Settlement Class are being represented by David R. Stickney, Esq. and Niki L.

26 Mendoza, Esq. of Bernstein Litowitz Berger & Grossmann LLP. Any questions regarding the settlementshould be directed to Mr. Stickney or Mrs. Mendoza at Bernstein Litowitz Berger & Grossmann LLP,

27 12481 High Bluff Drive, Suite 300, San Diego, CA 92130, (888) 924-1888, [email protected] . For

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further information regarding the Notice and the settlement, you may also contact the Claims1 Administrator at Atlas v. Accredited Home Lenders Holding Co. Securities Litigation, c/o The Garden

2 City Group, Inc., P.O. Box 9397, Dublin, OH 43017-4297or www.AccreditedSecuritiesLitigation.com, orcall 1-866-278-7838 toll free.

3 Statement of Rights, Options and Deadlines:

4YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT I

5 SUBMIT A CLAIM The only way to get a payment.

6 FORM BY NOVEMBER17, 2009

7 EXCLUDE YOURSELF Get no payment. This is the only option that allows you to ever beBY OCTOBER 13, 2009 part of any other lawsuit about the legal claims in this case.

8OBJECT BY OCTOBER Write to the Court about why you do not like the settlement, the

9 13, 2009 Plan of Allocation, or counsel’s request for attorneys’ fees andexpenses.

10 GO TO A HEARING ON Ask to speak in Court concerning the fairness of the settlement.

11 NOVEMBER 2, 2009 AT10:30 A.M.

12 DO NOTHING BUT If you do nothing, you will remain a Settlement Class Member,REMAIN A and therefore give up rights, but you will get no payment.

13 SETTLEMENT CLASSMEMBER

14

15 [END OF COVER PAGE]

16 BASIC INFORMATION

17 1. Why did I get this notice package?

18 You or someone in your family may have purchased or acquired Accredited Securities during theSettlement Class Period.

19The Court directed that you be sent this Notice because you have a right to know about the pendency,

20 and a proposed settlement, of a class action lawsuit, and about all of your options, before the Court

21 decides whether to approve the settlement. If the Court approves it and after objections and appeals (ifthere are any) are resolved, an administrator appointed by the Court will make the payments that the

22 settlement allows.

23 This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who iseligible for them, and how to get them.

24The Court in charge of the case is the United States District Court for the Southern District of California,

25 and the case is known as Atlas v. Accredited Home Lenders Holding Co., Case No. 07-00488-H-CAB.The plaintiffs representing the Settlement Class are Lead Plaintiff and Kornfeld. The defendants are

26 Accredited and the “Individual Defendants.

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2. What is this lawsuit about?1

2 This case was brought as a class action alleging that Defendants made false and misleading statementsand omissions in violation of §§ 10(b), 14(a), and 20(a) of the Securities Exchange Act of 1934

3 (“Exchange Act”) and §§ 11, 12(a)(2) and 15 of the Securities Act of 1933 (“Securities Act”).

4 On and after March 16, 2007, plaintiffs initiated this Litigation by filing several securities class actions inthe United States District Court for the Southern District of California (the “Court”). On June 25, 2007,

5 the Court entered an Order consolidating the related cases under Case No. 07-CV-0488-H, appointingArkansas Teacher as Lead Plaintiff, and approving Lead Plaintiff’s selection of Bernstein Litowitz Berger

6 & Grossmann LLP (“Lead Counsel”) as Lead Counsel.

7 On August 24, 2007, Plaintiffs filed the Corrected Consolidated Class Action Complaint For ViolationsOf The Federal Securities Laws (“Complaint”) alleging violations of §§ 10(b), 20(a) and 14(a) of the

8 Exchange Act and §§ 11, 12(a)(2) and 15 of the Securities Act against certain Defendants and AccreditedMortgage Loan REIT Trust (the “REIT”). On November 2, 2007, and November 6, 2007, respectively,

9 Defendants moved to dismiss the Complaint, and for judicial notice in support of their motions to dismiss.On December 14, 2007, Plaintiffs filed a response to the motions to dismiss, an opposition to the request

10 for judicial notice, and a motion to strike certain documents referenced in Defendants’ motions to dismiss.

11 Defendants filed reply briefs in support of their respective motions to dismiss on December 28, 2007.

12 On January 4, 2008, the Court entered an Order (1) Denying Accredited’s Motion To Dismiss; (2)Granting In Part With Leave To Amend Accredited Mortgage Loan REIT Trust’s And The Individual

13 Defendants’ Motions To Dismiss; and (3) Denying Plaintiff’s Motion To Strike (“MTD Order”). OnJanuary 30, 2008, Lead Plaintiff notified the Court that Plaintiffs would not be amending the Complaint

14 but would proceed under the Complaint in accordance with the Court’s MTD Order. On March 14, 2008,Defendants answered the Complaint.

15The Court held an Early Neutral Evaluation Conference on April 30, 2008. The Parties thereafter

16 conducted a conference pursuant to Federal Rules of Civil Procedure 26(f) and filed a Report of Rule26(f) Planning Meeting on June 9, 2008. The MTD Order lifted the automatic stay of discovery that

17 applies to securities actions pursuant to the Exchange Act, as amended by the Private Securities LitigationReform Act of 1995 (“PSLRA”). The completion of the Early Neutral Evaluation Conference lifted the

18 stay pursuant to Local Rule 16. On May 27, 2008, Lead Plaintiff served its First Request For ProductionOf Documents To All Defendants, and on June 4, 2008, noticed a deposition of Accredited pursuant to

19 Fed. R. Civ. P. 30(b)(6) related to its computer systems. Additional party and non-party discoveryfollowed.

20

21 The Court held a Case Management Conference on July 1, 2008. The Court thereafter issued a CaseManagement Conference Order Regulating Discovery And Other Pretrial Proceedings setting forth

22 certain discovery deadlines, including a discovery cut-off of July 6, 2009; certain deadlines for pretrialdisclosures and pretrial motions; a deadline for amending the pleadings; a deadline for briefing, and a

23 hearing date, for Plaintiffs’ motion for class certification; and setting a final pretrial conference forOctober 5, 2009.

24On July 24, 2008, August 4, 2008, August 11, 2008, and November 20, 2008, Lead Plaintiff filed motions

25 to compel production of documents by Accredited and third-party Grant Thornton LLP. On August 11,2008, third-party Grant Thornton LLP filed a motion for protective order. On December 12, 2008, and

26 December 23, 2008, Defendants filed motion to compel production of documents and responses to certaininterrogatories. The Court held Discovery Hearings on August 22, 2008, September 5, 2008, December

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23, 2008, January 9, 2009, January 28, 2009, February 27, 2009, March 9, 2009, March 17, 2009, April1 10, 2009. The Court entered a Proposed Protective Order on August 26, 2008.

2 On February 9, 2009, the Court issued a Revised Order Regulating Discovery And Other Pretrial

3 Proceedings, resetting certain deadlines, but maintaining the final pretrial conference previously set forOctober 5, 2009. On February 20, 2009, Plaintiffs filed their motion for class certification, to which

4 Defendants filed oppositions on April 10, 2009.

5 On April 16, 2009, following extensive settlement discussions overseen by the Mediator, the HonorableLayn Phillips (Ret.), including in-person mediation sessions on March 13, 2009, and April 15, 2009, the

6 Parties notified the Court that a settlement had been reached. In advance of the mediation sessions, theParties prepared detailed mediation statements. In their mediation statements and at the mediation

7 sessions, the Parties presented their respective views regarding the merits of the Litigation as well as theirviews concerning available defenses, potential sources of recovery, the evidence and damage analyses.

8 Pursuant to the Court’s April 16, 2009 order and to enable the parties and the Court to focus ondocumenting and submitting the settlement for the Court’s consideration, on April 21, 2009, the Parties

9 submitted a joint motion to vacate the class certification hearing and the prior scheduling orders, and toadopt a proposed schedule of settlement procedures. By Order dated April 27, 2009, the Court granted

10 the Parties’ joint motion, vacating the briefing schedule and hearing on Plaintiff’s class certificationmotion, vacating the Court’s prior scheduling orders, and issued a scheduling order for submission and

11 consideration of approval of the settlement.

12 On May 1, 2009, Accredited filed a Voluntary Chapter 11 Bankruptcy Petition in the United States

13 Bankruptcy Court, District of Delaware. The settlement is conditioned on receiving an Order of theBankruptcy Court approving, solely to the extent necessary, Accredited’s participation in the settlement,

14 and the use of the proceeds of the Directors’ and Officers’ Liability Insurance Policies to fund theSettlement Fund.

15

3. Why is this Litigation a class action?16

In a class action, one or more people called class representatives (in this case the Lead Plaintiff) sue on17 behalf of people who have similar claims. All of these people and/or entities are a class or members of

the class. One court resolves the issues for all members of the class, except for those who exclude18 themselves from the class. United States District Judge Marilyn L. Huff is in charge of this class action.

19 4. Why is there a settlement?

20 The Court did not decide in favor of Plaintiffs or Defendants. Instead, the lawyers for both sides of the

21 lawsuit have negotiated a settlement, with the assistance of a highly respected mediator, Layn Phillips,that they believe is in the best interests of their respective clients. The settlement allows both sides to

22 avoid the risks and cost of lengthy and uncertain litigation and the uncertainty of a trial and appeals, andpermits Settlement Class Members to be compensated without further delay. Plaintiffs and their attorneys

23 believe that the settlement is in the best interest of all Settlement Class Members.

24 WHO IS IN THE SETTLEMENT

25 To see if you may get money from this settlement, you first have to decide if you are a Settlement ClassMember.

26

5. How do I know if I am part of the settlement?27

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The Settlement Class includes all persons and entities who purchased or acquired Accredited Securities1 between November 1, 2005, through March 12, 2007, inclusive, and who were injured thereby.

2 6. Are there exceptions to being included in the Settlement Class?

3 Yes. Excluded from the Settlement Class are Defendants; the officers and directors of Accredited at all

4 relevant times; members of their immediate families and their legal representatives, heirs, successors orassigns and any entity in which any Defendant has or had a controlling interest, including the REIT. Also

5 excluded from the Settlement Class are those Persons who timely and validly request exclusion from theSettlement Class as explained in this Notice.

6

7. I’m still not sure if I am included.7

If you still are not sure whether you are included, you can ask for free help. You can call 1-866-278-78388 or visit www. AccreditedSecuritiesLitigation.com for more information or you can call David Stickney or

Niki Mendoza at 1-888-924-1888, or you can fill out and return the claim form described in Question 109 to see if you qualify.

10 THE SETTLEMENT BENEFITS

11 8. What does the settlement provide?

12 The Settlement Fund consists of twenty-two million dollars ($22,000,000). These funds will be

13 distributed to eligible members of the Settlement Class who send in valid and timely claim forms(“Claimants”), after payment of Lead Counsel’s Court-approved legal fees and expenses and Plaintiffs’

14 expenses, and the taxes, expenses and the costs of claims administration, including the costs of printingand mailing this Notice and the cost of publishing newspaper notice (the “Net Settlement Fund”).

15

9. How much will my payment be?16

Your share of the fund will depend on the number of Accredited Securities represented by valid claim17 forms that members of the Settlement Class send in and the amount of those claims, how many

Accredited Securities you held, what type of Accredited Securities you bought, and when you bought and18 sold them. A claim will be calculated as follows:

19 The Net Settlement Fund will be distributed to Claimants under the Plan of Allocation (the “Plan”)described below. The Plan provides that Claimants will be eligible to participate in the distribution of the

20 Net Settlement Fund only if Claimants have a net market loss on all transactions in Accredited Securities

21 during the Settlement Class Period.

22 To the extent there are sufficient funds in the Net Settlement Fund, each Claimant will receive an amountequal to the Claimant’s “Recognized Loss,” as defined below. If, however, (and as is more likely) the

23 amount in the Net Settlement Fund is not sufficient to permit payment of the total Recognized Loss ofeach Claimant, then each Claimant shall be paid the percentage of the Net Settlement Fund that each

24 Claimant’s claim bears to the total of the Recognized Losses of all Claimants ( i.e, the Claimant’s pro rata

share). Payment in this manner shall be deemed conclusive against all Claimants.

25For purposes of determining the amount a Claimant may recover under the Plan, Lead Counsel conferred

26 with its damages consultant and the Plan reflects an assessment of the damages that they believe couldhave been recovered had Plaintiffs prevailed at trial.

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Defendants do not agree with the characterization that any damages were suffered by Plaintiffs or the1 Settlement Class.

2 The Plan, subject to Court approval or modification without further notice, is as follows:

3 I. GENERAL PROVISIONS

4 A. Definitions:1. The defined terms used herein (e.g., “Accredited”), have the meanings given to

5 them in this Notice.2. The term “market loss” means the amount by which the actual purchase or

6 acquisition price of that security is greater than the actual sale price of thatsecurity.

7 3. The term “market profit” means the amount by which the actual purchase oracquisition price of that security is less than the actual sale price of that security.

8 4. The term “net market loss” means any market loss that occurs from the trading ofAccredited Securities during the Settlement Class Period after deducting any

9 profits made from the trading of other Accredited Securities during theSettlement Class Period.

10 5. The term “Recognized Loss,” as used herein, is not market loss. Rather, it is acalculation to arrive at a loss figure for purposes of calculating an Authorized

11 Claimant’s pro rata participation in the Net Settlement Fund as described below.

126. The term “Recognized Gain,” as used herein, is not market gain. Rather, it is a

calculation to arrive at a gain figure for purposes of calculating an Authorized

13 Claimant’s pro rata participation in the Net Settlement Fund as described below.7. The term “disclosure days” means those days during the Settlement Class Period

14 when Accredited first issued allegedly false statements concerning certain of thefactual allegations in the Complaint. These dates include: November 1, 2005,

15 December 19, 2005 and March 6, 2007.8. The term “corrective disclosure days” means those days during the Settlement

16 Class Period on which Plaintiffs claim the change in price of AccreditedSecurities was attributable to corrections regarding the allegedly fraudulent

17 misstatements being disseminated into the market. These dates include: August9, 2006, August 11, 2006, October 19, 2006, March 5, 2007, March 12, 2007 and

18 March 13, 2007.B. To Receive a Distribution from the Net Settlement Fund, a Settlement Class Member

19 MUST:1. Establish membership in the Settlement Class;

20 2. Have purchased or otherwise acquired one of the Accredited Securities listed in

21¶C, below;

3. Complete and sign a Proof of Claim form and supply all required documentation;

224. Submit the completed claim form and documentation to the Claims

Administrator on or before November 17, 2009; and

23 5. Have incurred a Recognized Loss and otherwise be deemed an AuthorizedClaimant.

24 C. Persons Who Purchased or Otherwise Acquired Any of the Following AccreditedSecurities During the Settlement Class Period May be Eligible for Participation in the

25 Distribution:1. Accredited common stock, including but not limited to those shares acquired

26 pursuant to a Registration Statement and Prospectus for the merger betweenAccredited and Aames; and/or

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2. Accredited Mortgage Loan REIT Trust’s 9.75% Series A Perpetual Cumulative1 Preferred Shares (“preferred stock” or “preferred shares”).

2 D. Each Proof of Claim Form Must Separately Set Forth:

1. The claimant’s opening securities position in Accredited common stock and/or

3 preferred stock as of the close of trading on October 31, 2005, the day before thefirst day of the Settlement Class Period;

4 2. Each transaction, i.e., purchase, acquisition, or sale, made during the SettlementClass Period (and continuing through June 8, 2007) in any Accredited Security,

5 including the number of Accredited Securities acquired in exchange for securitiesof Aames Investment Corporation; and

6 3. Each claimant’s ending securities position in Accredited common stock and/orpreferred stock as of the close of trading on June 8, 2007, 90 days after the last

7 day of the Settlement Class Period.II. FACTORS CONSIDERED IN DEVELOPING THE PLAN OF ALLOCATION

8 A. The Recognized Loss for a claimant’s transactions will be calculated by the ClaimsAdministrator in consultation with Lead Counsel in accordance with the provisions of

9 this Plan of Allocation. Factors considered in developing the Plan of Allocation include,among others:

10 1. The volume of publicly traded Accredited Securities purchased, acquired or soldduring the Settlement Class Period;

11 2. The time period in which an Accredited Security was purchased or acquired;

123. Whether the security was held until after the end of the Settlement Class Period

(March 12, 2007) or whether it was sold during the Settlement Class Period and,

13 if so, when it was sold;4. The alleged artificial inflation in the price of Accredited Securities at different

14 times during the Settlement Class Period attributable to defendants’ falsestatements as alleged in this case (alleged “artificial inflation”) as calculated by

15 Lead Plaintiff’s consultant. Based on the opinions of its damages consultant,Lead Counsel assumed, for purposes of determining the Recognized Loss, that

16 there were varied amounts of alleged artificial inflation in prices of AccreditedSecurities for the entire Settlement Class Period, based on the assumption that

17 Lead Plaintiff could adequately allege and prove liability for that entire period.5. The type of security involved (common stock or preferred stock).

18 III. CALCULATION OF RECOGNIZED LOSS OR GAIN FOR CLAIMS GENERALLYA “Recognized Loss” or “Gain” will be calculated for each purchase or acquisition of Accredited

19 Securities that occurred during the Settlement Class Period, listed in the claim form, and for whichadequate documentation is provided.

20 A. Computation of Artificial Inflation for Accredited Securities

21For purposes of developing the Plan of Allocation, Lead Plaintiff’s consultant calculated the

amount of alleged artificial inflation in the daily closing market prices for Accredited Securities for each

22 day of the Settlement Class Period. In computing alleged artificial inflation, Lead Plaintiff’s consultantconsidered price changes of Accredited Securities in reaction to certain public announcements regarding

23 Accredited, and adjusted the price changes in Accredited Securities for changes that were attributable tomarket forces unrelated to the alleged fraud.

24 The alleged artificial inflation for Accredited common stock and preferred stock is set forth inTables A and B, respectively, attached to this Notice.

25 B. Use of “FIFO” Methodology for Computation of Recognized Losses for Settlement ClassMembers Who Made Multiple Transactions In Accredited Securities During the

26 Settlement Class PeriodFor Settlement Class Members who made multiple purchases, acquisitions or sales of Accredited

27 Securities during the Settlement Class Period, the earliest subsequent sale of the same type of security

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shall be matched first against those securities in the claimant’s opening position on the first day of the1 Settlement Class Period, and then matched chronologically thereafter against each purchase or acquisition

2 of that same type of security made during the Settlement Class Period. Purchases, acquisitions and salesof Accredited Securities shall be deemed to have occurred on the “trade” date as opposed to the

3 “settlement” date.C. No Recognized Losses For Certain Purchases and Sales

4 Purchases or acquisitions of Accredited Securities that are matched to sales prior to the firstcorrective disclosure day (i.e., August 9, 2006) will have a Recognized Loss of zero. This is because any

5 losses prior to the first corrective disclosure were not allegedly caused by that disclosure, but ratherallegedly by other market forces, and the alleged artificial inflation amount remained constant or was

6 increasing during this time period. Similarly, individuals who purchased and sold Accredited Securitiessolely during a subsequent period in which the amount of alleged artificial inflation remained constant

7 (i.e., individuals who purchased and sold the same amount of Accredited Securities during the periodAugust 11, 2006, through October 18, 2006), will also have a Recognized Loss of zero.

8 There is no Recognized Loss attributable to short sales.D. Acquisition by Gift, Inheritance or Operation of Law

9 If a Class Member acquired Accredited Securities during the Settlement Class Period by way ofgift, inheritance or operation of law (“gift acquisition”) (except those shares exchanged by reason of the

10 merger of Aames Investment Corporation with Accredited), such a claim will be computed by using thedate and price of the original purchase and not the date and price of transfer. To the extent those

11 Accredited Securities were originally purchased prior to commencement of the Settlement Class Period,

12 the Recognized Loss for that acquisition shall be zero.

E. Employee Stock Options

13 For Settlement Class Members who acquired Accredited Securities by exercising employee stockoptions granted to him or her by Accredited, the purchase price shall be the exercise price or strike price

14 that the Settlement Class Member actually paid.F. Payments Less Than $10.00

15 A payment to any Settlement Class Member that would amount to less than $10.00 in total willnot be included in the calculation of the Net Settlement Fund, and no payment to these Settlement Class

16 Members will be distributed.IV. CALCULATION OF RECOGNIZED LOSS AND GAIN

17 A. Recognized Loss1. For shares of Accredited Securities held as of the close of trading on October 31,

18 2005, the day before the beginning of the Settlement Class Period, theRecognized Loss is zero.

19 2. Shares of Accredited Securities purchased or acquired (including share exchangeacquisitions) from November 1, 2005, through March 12, 2007:

20 (a) and that were still held at the close of trading on March 12, 2007: For

21each share of Accredited Securities that was purchased or acquired during theSettlement Class Period and was still held at the close of trading on March 12,

222007, the Recognized Loss per share (which is limited to be non-negative) is thelesser of: (a) the alleged artificial inflation amount indicated in the relevant Table

23 A or B, for the date such share was purchased or acquired; or (b) the purchaseprice or acquisition price per share (including commissions and other charges)

24 less the rolling average closing price during the 90 days after the end of theSettlement Class Period as indicated in Table C for the date such share was sold,

25 or June 8, 2007, if still held on June 8, 2007.(b) and that were sold during the Settlement Class Period: For each share of

26 Accredited Securities that was purchased or acquired during the Settlement ClassPeriod, and that was sold during the Settlement Class Period, the Recognized

27 Loss per share (which is limited to be non-negative) is the lesser of: (a) the

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amount by which the alleged artificial inflation per share on the date of purchase1 or acquisition exceeds the alleged artificial inflation per share on the date of sale,

2 as set forth in the relevant Table A or B; or (b) the purchase price less the sales

price.

3 B. Recognized Gain1. Shares of Accredited Securities held as of the close of trading on October 31,

4 2005, the day before the beginning of the Settlement Class Period:(a) and that were still held at the close of trading on March 12, 2007: For

5 each share of Accredited Securities that was held as of the close of trading onOctober 31, 2005 and was still held at the close of trading on March 12, 2007, the

6 Recognized Gain per share is zero.(b) and that were sold during the Settlement Class Period: For each share of

7 Accredited Securities that was held as of the close of trading on October 31,2005, and that was sold during the Settlement Class Period, the Recognized Gain

8 per share is the alleged artificial inflation per share on the date of sale, as setforth in the relevant Table A or B.

9 2. Shares of Accredited Securities purchased or acquired (including share exchangeacquisitions) from November 1, 2005 through March 12, 2007:

10 (a) and that were still held at the close of trading on March 12, 2007: Foreach share of Accredited securities that was purchased or acquired during the

11 Settlement Class Period and was still held at the close of trading on March 12,

122007, the Recognized Gain per share is zero.(b) and that were sold during the Settlement Class Period: For each share of

13 Accredited Securities that was purchased or acquired during the Settlement ClassPeriod, and that was sold during the Settlement Class Period, the Recognized

14 Gain per share (which is limited to be non-negative) is the amount by which thealleged artificial inflation per share on the date of sale exceeds the alleged

15 artificial inflation per share on the date of purchase or acquisition, as set forth inthe relevant Table A or B.

16 C. Special Factors Related to the Acquisition of Accredited Common Stock from theAccredited/Aames Merger:

17 1. Shares of Accredited common stock acquired during the Settlement Class Periodin connection with the Accredited/Aames merger will have a Recognized Loss

18 and/or Gain based upon the criteria referred to in Sections IV(A) and IV(B),except:

19 2. Shares of Accredited common stock acquired in connection with theAccredited/Aames merger will be deemed to have been acquired on October 1,

20 2006 at a price of $35.94 per share.

21 V.

COMPUTATION OF NET RECOGNIZED LOSS FOR EACH SETTLEMENT CLASSMEMBER

22Recognized Loss or Gain with respect to a purchase or acquisition of an Accredited Security (e.g.,

common stock or preferred stock), is calculated by multiplying the number of shares of each such security

23 by the appropriate Recognized Loss or Gain for a single share of that security, as described in Section IV.The Net Recognized Loss for each Settlement Class Member is calculated by (1) adding the

24 Recognized Losses for each Accredited Security purchased or acquired by the Settlement Class Memberduring the Settlement Class Period (i.e., adding all Recognized Losses for common stock and/or preferred

25 stock); and (2) subtracting any Recognized Gains for each Accredited Security held or sold by theSettlement Class Member during the Settlement Class Period (i.e., subtracting all Recognized Gains for

26 common stock and/or preferred stock).

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NOTE: ALL MARKET PROFITS SHALL BE SUBTRACTED FROM ALL MARKET1 LOSSES ON ALL TRANSACTIONS IN ACCREDITED DURING THE SETTLEMENT CLASS

2 PERIOD TO DETERMINE THE NET MARKET LOSS OF EACH SETTLEMENT CLASS MEMBER.

For purposes of determining whether a Claimant had a market profit or suffered a market loss

3 from his, her or its overall transactions in any Accredited Security during the Settlement Class Period, theClaims Administrator shall: (i) total the amount paid (including commissions and other charges) for all

4 Accredited Securities purchased during the Settlement Class Period by the Claimant (the “Total PurchaseAmount”); (ii) match any sales of each respective Accredited Security during the Settlement Class Period

5 first against the Claimant’s opening position in each respective Accredited Security (the proceeds of thosesales will not be considered for purposes of calculating gains or losses); (iii) total the amount received

6 (net of commissions, etc.) for sales of the remaining Accredited Security sold during the Settlement ClassPeriod (the “Sales Proceeds”); and (iv) assign the holding price indicated in Table C for each security (the

7 closing price of each Accredited Security on March 13, 2007) for the number of Accredited Securitiespurchased during the Settlement Class Period and still held at the end of the Settlement Class Period

8 (“Holding Value”). The Total Purchase Amount (i) less the Sales Proceeds (ii) and less the HoldingValue (iii) will be deemed a Claimant’s market profit or market loss (a profit occurs if a negative number

9 is calculated) on his, her or its overall transactions in each Accredited Security during the SettlementClass Period.

10 IF, DURING THE SETTLEMENT CLASS PERIOD, A SETTLEMENT CLASS MEMBERMADE A NET MARKET PROFIT IN HIS, HER OR ITS TRANSACTIONS IN ACCREDITED

11 SECURITIES, THE AMOUNT OF THE SETTLEMENT CLASS MEMBER’S RECOGNIZED LOSS

12 SHALL BE ZERO.

IF, DURING THE SETTLEMENT CLASS PERIOD, A SETTLEMENT CLASS MEMBER

13 HAS A NET MARKET LOSS IN HIS, HER OR ITS TRADING IN ACCREDITED SECURITIESTHAT IS LESS THAN HIS, HER OR ITS RECOGNIZED LOSS, THE SETTLEMENT CLASS

14 MEMBER’S CLAIM SHALL BE LIMITED TO THE SETTLEMENT CLASS MEMBER’S NETMARKET LOSS.

15VI. DISTRIBUTION OF THE NET SETTLEMENT FUND

16“Net Recognized Loss” will be used for calculating the relative amount of participation by authorized

17 claimants in the Net Settlement Fund and does not reflect the actual amount an authorized claimant canexpect to recover from the Net Settlement Fund. The Net Recognized Losses of all Authorized Claimants

18 may be greater than the Net Settlement Fund. In such event, subject to the $10.00 minimum paymentrequirement discussed above, each Authorized Claimant shall receive his, her or its pro rata share of the

19 Net Settlement Fund, which shall be his, her or its Net Recognized Loss divided by the total of all Net

20 Recognized Losses to be paid, multiplied by the total amount in the Net Settlement Fund.

21 Although short sales will have no Recognized Loss under the Plan of Allocation, any Recognized Gainattributable to such short sales will be used to offset Recognized Losses from other transactions.

22 Furthermore, market gains or losses attributable to short sales will be calculated as part of the market gainor loss calculation.

23 Accredited Securities acquired by means of a gift, inheritance, or operation of law shall only be

24 considered if the shares in question were purchased during the Settlement Class Period by the donor,decedent, or transferor, and the donor, someone on behalf of the decedent, or transferor does not submit a

25 Claim Form with respect to the shares. In such instances, if possible, the recipient must providedocumentation of the original purchase in addition to the transfer.

26For all Accredited Securities, the Court has reserved jurisdiction to allow, disallow or adjust the claim of

27 any Settlement Class Member on equitable grounds.

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1 Payment pursuant to the Plan shall be conclusive against all Claimants. No Person shall have any claim

2 against Lead Counsel, Lead Plaintiff, the Claims Administrator, Defendants and their Related Parties, orany Person designated by Lead Counsel based on distributions made substantially in accordance with the

3 Stipulation and the Settlement contained therein, the Plan of Allocation, or further order(s) of the Court.All Settlement Class Members who fail to timely submit a Proof of Claim within such period, or such

4 other period as may be ordered by the Court, or otherwise allowed, shall be forever barred from receivingany payments pursuant to the settlement, but will in all other respects be subject to and bound by the

5 terms of the settlement, including the releases. Notwithstanding the foregoing, Lead Counsel may, in itsdiscretion, accept for processing late submitted claims so long as the distribution of the Net Settlement

6 Fund to Authorized Claimants is not materially delayed.

7 HOW YOU GET A PAYMENT – SUBMITTING A CLAIM FORM

8 10. How can I get a payment?

9 To qualify for a payment, you must send in a claim form. A claim form is enclosed with this Notice.Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it, and

10 mail it in the enclosed envelope postmarked no later than November 17, 2009.

11 11. When would I get my payment?

12 The Court will hold a Settlement Hearing on November 2, 2009, at 10:30 a.m., to decide whether to

13 approve the settlement. The Court may adjourn or continue the Settlement Hearing without further noticeto the Settlement Class. If the Court approves the settlement, there could be appeals. It is always

14 uncertain if or when these appeals will be resolved favorably for the settlement. Resolving them can taketime, perhaps more than a year. It also takes time for all the claim forms to be processed. If there are no

15 appeals and depending on the number of claims submitted, the claims administrator could distribute theSettlement Fund as early as nine months after the Settlement Hearing. Please be patient.

16

12. What am I giving up to get a payment or stay in the Settlement Class?17 Unless you exclude yourself, you are staying in the Settlement Class, and that means you cannot sue, or

18 be part of any other lawsuit against the Defendants about the same issues or the claims that were or couldhave been raised in the Litigation. To receive the payment under the settlement, if the settlement is

19 approved, you must release all “Released Claims” against Defendants and their “Related Parties” (asdefined below).

20 “Released Claims” means all rights, demands, liabilities, claims (including “Unknown Claims” as

21 defined in the Stipulation) and causes of action of every nature and description, whether arising underfederal, state, common or foreign law, that Plaintiffs or any other member of the Settlement Class (a)

22 asserted in the Complaint, or (b) could have asserted in any forum that arise out of or are based upon theallegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or

23 referred to in the Complaint and that relate to the purchase or acquisition of Accredited Securities duringthe Settlement Class Period.

24“Related Parties” means with respect to each Defendant, the immediate family members, heirs,

25 executors, administrators, successors, assigns, present and former employees, officers, directors,attorneys, legal representatives, insurers, reinsurers, and agents of each of them, and any person or entity

26 which is or was related to or affiliated with any Defendant or in which any Defendant has or had acontrolling interest and the present and former parents, subsidiaries, divisions, affiliates, predecessors,

27 successors, employees, officers, directors, attorneys, assigns, legal representatives, insurers, reinsurers,

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and agents of each of them. The Related Parties, with respect to Accredited, includes but is not limited to1 the REIT.

2EXCLUDING YOURSELF FROM THE SETTLEMENT

3

13. How do I exclude myself from the settlement?4

You can exclude yourself from the settlement. If you do not want a payment from the settlement, but you5 want to keep any right to sue any of the Defendants or any of the Related Parties about the claims you

would otherwise be releasing in this settlement, then you must take steps to exclude yourself from the6 settlement. This is called excluding yourself or is sometimes referred to as opting out of the class.

7 To exclude yourself, you must send a letter by mail saying that you want to be excluded from Atlas v.

8 Accredited Home Lenders Holding Co. You must submit a list of all of your transactions in AccreditedSecurities during the period between November 1, 2005, and March 12, 2007, inclusive, and the dates and

9 prices of such transactions. Be sure to also include your name, address, telephone number, and signature.You must mail your exclusion request postmarked no later than October 13, 2009, to:

10Atlas v. Accredited Home Lenders Holding Co. Securities Litigation

11 c/o The Garden City Group, Inc.P.O. Box 9397

12 Dublin, OH 43017-4297

13 You cannot exclude yourself on the phone or by e-mail. If you ask to be excluded, you will not get anysettlement payment, and you cannot object to the settlement. Also, you will not be legally bound by

14 anything that happens in this lawsuit, and you would not be prevented by this settlement from suingDefendants and their Related Parties for the Released Claims in the future. However, if you exclude

15 yourself and bring your own lawsuit, you would be subject to all the risks of litigation, including the risk

16 that your lawsuit would be rejected because you filed it too late.

17 If you do not file your request for exclusion on time, you will be legally bound by all the proceedings inthis Litigation, including all court orders and judgments in the Litigation, even if you have a lawsuit

18 pending against the Released Persons that covers Released Claims, or if you subsequently start a lawsuitor an arbitration or any other proceedings against any of the Released Persons that are covered by the

19 Released Claims.

20 14. If I do not exclude myself, can I sue Defendants for the same thing later?

21 No. Unless you exclude yourself, you give up any right to sue Defendants or their Related Parties for theclaims that this settlement resolves. Remember, the exclusion deadline is October 13, 2009.

22

15. If I exclude myself, can I get money from this settlement?23

No. If you exclude yourself, do not send in a claim form to ask for any money. Once you exclude24 yourself, you will receive no cash payment even if you also submit a claim form, unless you withdraw

25 your notice of exclusion before the deadline.

THE LAWYERS REPRESENTING YOU26

27 16. Do I have a lawyer in this case?

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1 Lead Plaintiff and the Settlement Class are represented by the law firm of Bernstein Litowitz Berger &

2 Grossmann LLP. This law firm is referred to as Lead Counsel. You will not be charged for the work ofthe lawyers of Lead Counsel. If you want to be represented by your own lawyer, you may hire one at

3 your own expense.

4 17. How will the lawyers be paid?

5 At the Settlement Hearing, Lead Counsel will request the Court to award attorneys fees of 25% of theSettlement Fund, plus payment of expenses not to exceed $750,000, which were incurred in connection

6 with the Litigation, plus interest thereon. If the Court approves Lead Counsel’s fee and expenseapplication, the average cost per share of common stock will be approximately $0.01, and the average

7 cost per share of preferred stock will be approximately $0.01. This compensation will be paid from theSettlement Fund. Settlement Class Members are not personally liable for any such fees or expenses. To

8 date, Lead Counsel has not received any payment for their services in conducting the Litigation nor hascounsel been paid for its expenses incurred. Plaintiff Kornfeld also intends to apply to the Court for an

9 award of a service award not to exceed $5,000.

10 OBJECTING TO THE SETTLEMENT

11 18. How do I tell the Court that I do not like the Settlement?

12 If you’re a member of the Settlement Class (and you have not excluded yourself), you can object to the

13 proposed settlement if you do not like any part of it. You can give reasons why you think the Courtshould not approve the settlement, the Plan of Allocation or the request for attorneys’ fees and expenses.

14 The Court will consider your views. To object, you must send a signed letter saying that you object to theproposed settlement in “Atlas v. Accredited Home Lenders Holding Co., Case No. 07-cv-00488-H-CAB,

15 (United States District Court for the Southern District of California).” Your letter must include yourname, address, telephone number and your original signature (no copies). You must also include all your

16 transactions in Accredited Securities during the Settlement Class Period and the dates and prices of suchtransactions. Mail the objection postmarked no later than October 13, 2009, to:

17(1) Clerk of the Court

18 United States District Court for the Southern District of California880 Front Street, Room 4290

19 San Diego, CA 92101-8900

20 (2) BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP

21DAVID R. STICKNEY

NIKI L. MENDOZA

2212481 High Bluff Drive, Suite 300

San Diego, CA 92130

23and

24(3) PAUL, HASTINGS, JANOFSKY & WALKER LLP

25 CHRISTOPHER H. McGRATH4747 Executive Drive, 12th Floor

26 San Diego, CA 92121

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You may object either on your own or through an attorney that you hire at your own expense. If you do1 hire an attorney to represent you, your attorney must file a notice of appearance with the clerk of the

2 Court and deliver a copy of that notice to Lead Counsel and Defendants’ counsel no later than October13, 2009.

3 If you do not follow the directions in this notice for objecting to the settlement, you will forfeit all rights

4 that you may have to object to and/or appeal this settlement unless the Court orders otherwise. You willbe bound by the orders and judgments in this lawsuit.

5

19. What is the difference between objecting to the settlement and excluding myself from the6 settlement?

7 Objecting is telling the Court that you do not like something about the proposed settlement. You canobject only if you stay in the Settlement Class. Excluding yourself is telling the Court that you do not

8 want to be part of the Settlement Class. If you exclude yourself, you have no basis to object because thecase no longer applies to you.

9THE COURT’S SETTLEMENT HEARING – SCHEDULED FOR NOVEMBER 2, 2009

10The Court will hold a hearing to decide whether to approve the proposed settlement. You may attend, but

11 you do not have to.

12 20. When and where will the Court decide whether to approve the settlement?

13 The Court will hold a hearing at 10:30 a.m. on November 2, 2009, at the United States District Court for

14 the Southern District of California, located at 940 Front Street, San Diego, CA 92101-8900, in Courtroom13 (“Settlement Hearing”). The Court may adjourn or continue the Settlement Hearing without further

15 notice to the Settlement Class. At this hearing, the Court will consider whether the settlement is fair,reasonable and adequate. If there are objections, the Court will consider them. The Court will listen to

16 people who have asked to speak at the hearing. The Court will also decide whether to approve the Plan ofAllocation, and the payment of fees, costs and expenses to Lead Counsel, including the award to Lead

17 Plaintiff to compensate it for its time and effort in this case. We do not know how long the hearing willtake or whether the Court will make its decision about the settlement on that day or sometime later.

18

21. Do I have to come to the hearing?19

Settlement Class Members do not need to appear at the hearing or take any other action to indicate that20 they approve of the settlement. Lead Counsel will answer questions the Court may have about the

21 settlement. But if you would like to attend the hearing, you are welcome to do so, at your own expense.If you send an objection, you do not have to come to Court to talk about it. The Court will consider your

22 written objection, as long as you mailed your objection in on time (see response to question 18). Youmay also pay your own lawyer to attend, but it is not necessary.

23 22. May I speak at the hearing?

24 If you object to the settlement, you may ask the Court for permission to speak at the hearing. To do so,you must include with your objection (see response to question 18) a statement saying that it is your

25 “Notice of Intention to Appear in Atlas v. Accredited Home Lenders Holding Co., Case No. 07-cv-00488-H-CAB (United States District Court for the Southern District of California).” Persons who intend to

26 object to any part of the settlement and wish to present evidence at the hearing must also include in their

27

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written objection the identity of any witnesses they may call to testify and exhibits they intend to1 introduce into evidence at the hearing.

2 You cannot speak at the Settlement Hearing if you exclude yourself from the settlement.

3 IF YOU DO NOTHING

4

5 23. What happens if I do nothing at all?

6 If you do nothing, you will not receive any payments from this settlement. However, unless you excludeyourself, you will not be able to start a lawsuit, or be part of any other lawsuit against the Defendants or

7 their Related Parties about the Released Claims in this case ever again.

8 GETTING MORE INFORMATION

9

24. Are there more details about the proposed settlement?10

This Notice summarizes the proposed settlement. More details are in a Stipulation of Settlement dated11 June 23, 2009 (the “Stipulation”), which has been filed with the Court. You can inspect a copy of the

Stipulation at the office of the Clerk of the United States District Court for the Southern District of12 California, 880 Front Street, Room 4290, San Diego, CA 92101-8900, during regular business hours or at

13 www. AccreditedSecuritiesLitigation.com .

14 25. How do I get more information?

15 For additional, detailed information concerning the matters involved in this lawsuit, you may inspect thepleadings, the orders of the Court, and other papers filed in this lawsuit at the office of the Clerk of the

16 United States District Court for the Southern District of California, 880 Front Street, Room 4290, SanDiego, CA 92101-8900, during regular business hours.

17 You can also contact (1) the Claims Administrator at 1-866-278-7838; or (2) Lead Counsel David R.Stickney or Niki L. Mendoza, Bernstein Litowitz Berger & Grossmann LLP, 12481 High Bluff Drive,

18 Suite 300, San Diego, CA 92130, 1-888-924-1888. Please do not call the Court or the Clerk of the

19 Court for additional information about the settlement.

20 26. Special notice to nominees

21 Nominees who purchased or otherwise acquired Accredited Securities for beneficial owners who areSettlement Class Members are directed to: (a) request within fourteen (14) days of receipt of this Notice

22 additional copies of this Notice and the Claim Form from the Claims Administrator for such beneficialowners; or (b) send a list of the names and addresses of such beneficial owners to the Claims

23 Administrator within fourteen (14) days after receipt of this Notice. If a nominee elects to send thisNotice to beneficial owners, such nominee is directed to mail this Notice within fourteen (14) days of

24 receipt of the copies of the Notice from the Claims Administrator, and upon such mailing, the nomineeshall send a statement to the Claims Administrator confirming that the mailing was made as directed, and

25 the nominee shall retain the list of names and addresses for use in connection with any possible future

26 notice to the Settlement Class.

27

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Regardless of whether you choose to complete the mailing yourself or elect to have the mailing performed1 for you, you may obtain reimbursement for or advancement of reasonable administrative costs actually

2 incurred or expected to be incurred in connection with forwarding the Notice and which would not havebeen incurred but for the obligation to forward the Notice, upon submission of appropriate documentation

3 to the Claims Administrator.

4 By Order of the United States District Court for the Southern District of California.

5

6DATED:

7

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1

2

3

4

5

6

7UNITED STATES DISTRICT COURT

8SOUTHERN DISTRICT OF CALIFORNIA

9MICHAEL ATLAS and GAIL ATLAS, Case No. 3:07-cv-00488-H-CAB

10 Individually and On Behalf of All Others11 Similarly Situated,

PROOF OF CLAIM AND RELEASE

12 Plaintiffs, EXHIBIT A-2

13 vs.

14 ACCREDITED HOME LENDERS15 HOLDING CO.; JAMES KONRATH;

JOSEPH J. LYDON; STUART D. MARVIN;16 JOHN S. BUCHANAN; DAVID E.

HERTZEL; and JEFFREY W. CRAWFORD,17

Defendants.18

19

20

21

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23

24

25

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07cv488

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1. GENERAL INSTRUCTIONS

1. To recover as a member of the Settlement Class based on your claims in the

action entitled Atlas vs. Accredited Home Lenders Holding Co., et al. Case No. 3:07-cv-00488-

H-CAB (the "Litigation"), you must complete and, on page hereof, sign this Proof of Claim

and Release. If you fail to file a properly addressed (as set forth in paragraph 3 below) Proof of

Claim and Release, your claim may be rejected and you may be precluded from any recovery

from the Settlement Fund created in connection with the proposed settlement of the Litigation.

2. Submission of this Proof of Claim and Release, however, does not assure that you

will share in the proceeds of the settlement of the Litigation.

3. YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF

CLAIM AND RELEASE POSTMARKED ON OR BEFORE NOVEMBER 17, 2009,

ADDRESSED AS FOLLOWS:

Atlas v. Accredited Home Lenders Holding Co. Securities Litigationc/o The Garden City Group, Inc.P.O. Box 9397Dublin, OH 43017-4297

If you are NOT a member of the Settlement Class (as defined below and in the Notice of

Pendency and Proposed Settlement of Class Action ("Notice")) DO NOT submit a Proof of

Claim and Release form.

4. If you are a member of the Settlement Class and you did not timely request

exclusion in connection with the proposed settlement, you are bound by the terms of any

judgment entered in the Litigation, including the releases provided therein, WHETHER OR NOT

YOU SUBMIT A PROOF OF CLAIM AND RELEASE.

II. CLAIMANT IDENTIFICATION

If you purchased or acquired Accredited common stock or preferred shares of Accredited

("Accredited Securities"), and held documents evidencing these transactions (i.e., stock

certificate(s), etc.) in your name, you are the beneficial purchaser as well as the record purchaser.

If, however, you purchased or acquired Accredited Securities and the transactional document(s)

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was/were registered in the name of a third party, such as a nominee or brokerage firm, you are

the beneficial purchaser and the third party is the record purchaser.

Use Part I of the Proof of Claim and Release form — entitled "Claimant Identification" —

to identify each purchaser of record ("nominee'), if different from the beneficial purchaser of

Accredited Securities which forms the basis of this claim. THIS CLAIM MUST BE FILED

BY THE ACTUAL BENEFICIAL PURCHASER OR PURCHASERS, OR THE LEGAL

REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS, OF THE

ACCREDITED SECURITIES UPON WHICH THIS CLAIM IS BASED.

All joint purchasers must sign this claim. Executors, administrators, guardians,

conservators and trustees must complete and sign this claim on behalf of persons represented by

them and their authority must accompany this claim and their titles or capacities must be stated.

The Social Security (or taxpayer identification) number and telephone number of the beneficial

owner may be used in verifying the claim. Failure to provide the foregoing information could

delay verification of your claim or result in rejection of the claim.

III. CLAIM FORM

Use Part II of Proof of Claim and Release — entitled "Transactions in Accredited

Securities" — to supply all required details of your transaction(s) in Accredited Securities. If

you need more space or additional schedules, attach separate sheets giving all of the required

information in substantially the same form. Sign and print or type your name on each additional

sheet.

On the schedules, provide all of the requested information. Failure to report all

requested information may result in the rejection of your claim.

List each transaction separately and in chronological order, by trade date, beginning with

the earliest. You must accurately provide the month, day and year of each transaction you list.

The date of covering a "short sale" is deemed to be the date of purchase of Accredited

Securities. The date of a "short sale" is deemed to he the date of sale of Accredited Securities.

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Copies of broker confirmations or other documentation of your transactions in Accredited

Securities should be attached to your claim. Failure to provide this documentation could delay

verification of your claim or result in rejection of your claim.

Atlas vs. Accredited Home Lenders Holding Co.

PART I: CLAIMANT IDENTIFICATION

Beneficial Owner's Name (First, Middle, Last) 1 Joint Owner's Name

Street Address

City State Zip Code

Foreign Province Foreign Country

(Daytime)Area Code Telephone Number

(Evening)Area Code Telephone Number

Social Security Number or Taxpayer Identification Number

Record Owner's Name (if different from beneficial owner listed above)

Check appropriate box (check only one box):

q Individual/Sole Proprietor q Joint Owners q Pension Planq Corporation q Partnership q Trustq IRA q Other (describe: }

NOTE: Separate Proofs of Claim should be submitted for each separate legal entity (e.g., aclaim from Joint Owners should not include separate transactions of just one of the Joint Owners,an Individual should not combine his or her IRA transactions with transactions made solely inthe Individual's name). Conversely, a single Proof of Claim should be submitted on behalf ofone legal entity including all transactions made by that entity no matter how many separateaccounts that entity has (e.g., a Corporation with multiple brokerage accounts should include all

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transactions in Accredited Securities) during the Settlement Class Period on one Proof of Claim,no matter how many accounts the transactions were made in.

NOTICE REGARDING ELECTRONIC FILES: Certain claimants with large numbers oftransactions may request, or may be requested, to submit information regarding their transactionsin electronic files. All Claimants MUST submit a manually signed paper Proof of Claim formlisting all their transactions, whether or not they also submit electronic copies. If you wish to fileyour claim electronically, you must contact the Claims Administrator at 1-866-278-7838, or visittheir website at www.gardencitygroup.com , to obtain the required file layout. No electronic fileswill be considered to have been properly submitted unless the Claims Administrator issues to theClaimant a written acknowledgment of receipt and acceptance of electronically submitted data.

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PART II: TRANSACTIONS IN ACCREDITED SECURITIES

A. INITIAL COMMON STOCK HOLDINGS: State the number of shares of Accreditedcommon stock the Claimant owned at the close of trading on October 31, 2005. If none, write"zero' or "0". If other than zero, be sure to attach the required documentation.

B. COMMON STOCK PURCHASES: List all purchases of Accredited common stockmade between November 1, 2005, and June 8, 2007, inclusive. (NOTE: If you acquired yourAccredited common stock during this period other than by an open market purchase, pleaseprovide a complete description of the terms of the acquisition on a separate page. You shouldinclude all Accredited common stock acquired in exchange for securities of Aames InvestmentCorporation). Be sure to attach the required documentation.

Trade Date(s)(List Chronologically) Number of Purchase Price

Month/Day/Year Shares Purchased Per Share Total Purchase Price*1 1 $ $ 1 1 $ $ 1 1 $ $ 1 1 $ $

* excluding commissions, transfer taxes or other fees

C. COMMON STOCK SALES: List all sales of Accredited common stock made betweenNovember 1, 2005, and June 8, 2007, inclusive. Be sure to attach the required documentation.

Trade Date(s)(List Chronologically) Number of Sale Price

Month/Day/Year Shares Sold Per Share Total Sale Price_* l 1 $ $

1 1 $ $

^1 1 $ $

*excluding commissions, transfer taxes or other fees

D. TOTAL COMMON STOCK SALES: State the total number of shares of Accreditedcommon stock sold between November 1, 2005, and June 8, 2007, inclusive.

E. UNSOLD COMMON STOCK HOLDINGS AT JUNE 8, 2007: State the number ofshares of Accredited common stock the Claimant owned at the close of trading on June 8, 2007.Be sure to attach the required documentation.

F. INITIAL-PREFERRED SHARE HOLDINGS: State the number of preferred sharesof Accredited the Claimant owned at the close of trading on October 31, 2005. If none, write

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"zero" or "0". If other than zero, be sure to attach the required documentation.

G. PREFERRED SHARE PURCHASES: List all purchases of preferred shares ofAccredited made between November 1, 2005, and June 8, 2007, inclusive. (NOTE: If youacquired your preferred shares of Accredited during this period other than by an open marketpurchase, please provide a complete description of the terms of the acquisition on a separatepage.). Be sure to attach the required documentation.

Trade Date(s)(List Chronologically) Number of Purchase Price

Month/Day/Year Shares Purchased Per Share Total Purchase Price* 1 1 $ ^

1 1 $ $

1 1 $ $

^1 1 $ $

* excluding commissions, transfer taxes or other fees

H. PREFERRED SHARE SALES: List all sales of preferred shares of Accredited madebetween November 1, 2005, and June 8, 2007, inclusive. Be sure to attach the requireddocumentation.

Trade Date(s)(List Chronologically) Number of Sale Price

Month/Day/Year Shares Sold Per Share Total Sale Price* 1 1 $ ^ i 1 $

*excluding commissions, transfer taxes or other fees

I. TOTAL PREFERRED SHARE SALES: State the total number of preferred shares ofAccredited sold between November 1, 2005, and June 8, 2007, inclusive.

J. UNSOLD PREFERRED SHARE HOLDINGS AT JUNE 8,2007: State thenumber of preferred shares of Accredited the Claimant owned at the close of trading onJune 8, 2007. Be sure to attach the required documentation.

IF YOU NEED ADDITIONAL SPACE TO LIST YOUR TRANSACTIONS PLEASEPHOTOCOPY THIS PAGE, WRITE YOUR NAME ON THE COPY AND CHECK THIS

BOX q

IF YOU DO NOT CHECK THIS SOX THESE ADDITIONAL PAGES MAY NOT BEREVIEWED

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PART III: RELEASE OF CLAIMS AND SIGNATURE

Definitions

"Accredited Securities" means (1) Accredited common stock, including but not limited tothose shares acquired pursuant to a Registration Statement and Prospectus for the mergerbetween Accredited and Aames; and (2) preferred shares of Accredited.

"Effective Date," as further defined in the Stipulation, means the first date by which all of theevents and conditions specified in 17.1 of the Stipulation have been met and have occurred.

"Judgment" means the judgment to be rendered by the Court substantially in the formattached to the Stipulation as Exhibit B.

"Released Persons" means each and all of Defendants and each and all of their RelatedParties.

"Released Claims" means all rights, demands, liabilities, claims (including "UnknownClaims" as defined further below) and causes of action of every nature and description whetherarising under federal, state, common or foreign law, that Plaintiffs or any other member of theSettlement Class (a) asserted in the Complaint, or (b) could have asserted in any forum that ariseout of or are based upon allegations, transactions, facts, matters or occurrences, representationsor omissions involved, set forth, or referred to in the Complaint and that relate to the purchase oracquisition of Accredited Securities during the Settlement Class Period.

"Settlement Class" means all persons and entities who purchased or acquired AccreditedSecurities between November 1, 2005, through March 12, 2007, inclusive, and who were injuredthereby. Excluded from the Settlement Class are Accredited, Berglund, Buchanan, Crawford,Erickson, Espy, Gunderson, Konrath, Lydon, Marvin, and Pratt; the officers and directors ofAccredited at all relevant times; members of their immediate families and their legalrepresentatives, heirs, successors or assigns and any entity in which any Defendant has or had acontrolling interest, including the REIT. Also excluded from the Settlement Class are thosePersons who timely and validly request exclusion from the Settlement Class pursuant to theNotice of Pendency and Proposed Settlement of Class Action.

"Unknown Claims" means all claims, demands, rights, liabilities, and causes of action ofevery nature and description which Plaintiffs or any Settlement Class Member do not know orsuspect to exist in his, her or its favor at the time of the release of the Released Persons which, ifknown by him, her or it, might have affected his, her or its settlement with and release of theReleased Persons, or might have affected his, her or its decision not to object to this settlement.With respect to any and all Released Claims, the Parties stipulate and agree that, upon theEffective Date, Plaintiffs shall expressly waive, and each of the Settlement Class Members shallbe deemed to have waived, and by operation of the Judgment shall have waived, the provisions,rights and benefits of California Civil Code Section1542, which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMSWHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS OR HER FAVOR AT THETIME OF EXECUTING THE RELEASE, WHICH IFKNOWN BY HIM OR HER MUST HAVE MATERIALLYAFFECTED HIS OR HER SETTLEMENT WITH THEDEBTOR.

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Plaintiffs shall expressly waive, and each of the Settlement Class Members shall be deemed tohave waived, and by operation of the Judgment shall have expressly waived, any and allprovisions, rights and benefits conferred by any law of any state or territory of the United States,or principle of common law, which is similar, comparable or equivalent to California Civil CodeSectionl542. Plaintiffs and Settlement Class Members may hereafter discover facts in additionto or different from those which he, she or it now knows or believes to be true with respect to thesubject matter of the Released Claims, but Plaintiffs shall expressly fully, finally and foreversettle and release, and each Settlement Class Member, upon the Effective Date, shall be deemedto have, and by operation of the Judgment shall have, fully, finally, and forever settled andreleased, any and all Released Claims, known or unknown, suspected or unsuspected, contingentor non-contingent, whether or not concealed or hidden, which now exist, or heretofore haveexisted, upon any theory of law or equity now existing or coming into existence in the future,including, but not limited to, conduct which is negligent, intentional, with or without malice, or abreach of any duty, law or rule, without regard to the subsequent discovery or existence of suchdifferent or additional facts. Plaintiffs acknowledge, and the Settlement Class Members shall bedeemed by operation of the Judgment to have acknowledged, that the foregoing waiver wasseparately bargained for and a key element of the settlement of which this release is a part.

The Release

I (we) understand and acknowledge that without further action by anyone, on and after theEffective Date, each Settlement Class Member, on behalf of themselves, their spouses, heirs,predecessors, successors, representatives, or assignees, and any person they represent, for good andsufficient consideration, the receipt and adequacy of which are hereby acknowledged, shall bedeemed to have, and by operation of law and of the Judgment shall have fully, finally, and foreverreleased, relinquished, and discharged all Released CIaims (including Unknown Claims) against eachand all of the Released Persons, whether or not a Proof of Claim and Release is executed anddelivered by, or on behalf of, such Settlement Class Member.

SIGNATURE AND CERTIFICATIONS

By signing and submitting this Proof of Claim and Release, the Claimant(s) or the person(s) whorepresents the Claimant(s) certifies, as follows:

I (We) submit this Proof of Claim and Release under the terms of the Stipulation of Settlementdescribed in the Notice. I also submit to the jurisdiction of the United States District Court for theSouthern District of California, with respect to my claim as a Settlement Class Member and forpurposes of enforcing the release set forth herein. I (We) further acknowledge that I am bound byand subject to the terms of any judgment that may be entered in the Litigation. I (We) agree to

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furnish additional information to the Claims Administrator to support this claim if requested to do so.I (We) have not submitted any other claim covering the same purchases or acquisitions of Accredited

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Securities during the Settlement Class Period and know of no other person having done so on mybehalf.

I (We) hereby acknowledge full and complete satisfaction of, and do hereby fully, finally andforever release, relinquish and discharge all Released Claims (including Unknown Claims) againsteach and all the "Released Persons," defined as each and all of Defendants and each and all of theirRelated Parties.

1. that the Claimant(s) is a (are) Settlement Class Member(s), as defined herein and in theNotice;2. that I (we) have not filed a request for exclusion from the Settlement Class and that I (we) donot know of any request for exclusion from the Settlement Class filed on my (our) behalf with

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respect to my (our) transactions in Accredited Securities;3. that I (we) own(ed) the Accredited Securities identified in the Proof of Claim, or that, insigning and submitting this Proof of Claim, I (we) have the authority to act on behalf of theowner(s) thereof;4. that Claimant(s) may be entitled to receive a distribution from the Net Settlement Fund;S. that I (we) agree to furnish such additional information with respect to this Proof of Claim asthe parties or the Court may require;6. that I (we) waive trial by jury, to the extent it exists, and agree to the Court's summarydisposition of the determination of the validity or amount of the claim made by this Proof ofClaim; and7. that I (we) certify that I am (we are) not subject to backup withholding under the provisionsof Section 3406(a)(1)(c) of the Internal Revenue Code.NOTE: If you have been notified by the Internal Revenue Service that you are subject tobackup withholding, please strike the language that you are not subject to backupwithholding in the certification above. The Internal Revenue Service does not require yourconsent to any provision other than the certification required to avoid backup withholding.

I (We) declare, under penalty of perjury under the laws of the United States of America, that thestatements made and answers given in this Proof of Claim are true and correct and that the documents

* submitted herewith are true and genuine.a

Signature of Claimant

Print Name of Claimant Date

Signature of Joint Claimant, if any

Print Name of Joint Claimant Date

If Claimant is other than are individual, or is not the person completing this form,the following also must he provided:

Signature of Person Completing Form

Print Name of Person Completing Form Date

Capacity of Person Signing (Executor, President, Trustee, etc.)

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REMINDER CHECKLISTPlease sign the Certification Section of the Proof of Claim and Release form.

If this Claim is being made on behalf of Joint Claimants, then both must sign.

Please remember to attach supporting documents.

DO NOT SEND ORIGINALS OF ANY SUPPORTING DOCUMENTS.

Keep a copy of your Proof of Claim and Release form and all documentation submitted foryour records.

The Claims Administrator will acknowledge receipt of your Proof of Claim and Release bymail, within 60 days. Your claim is not deemed filed until you receive anacknowledgment postcard. If you do not receive an acknowledgment postcard within 60days, please call the Claims Administrator toll free at 1 (866) 278-7838.

If you move, please send your new address to:

Atlas vs. Accredited Home Lenders Holding Co. Securities Litigationc/o The Garden City Group, Inc.

P.Q. Box 9397Dublin, OH 43017-4297

Do not use highlighter on the Proof of Claim and Release form or supportingdocumentation.

THIS PROOF OF CLAIM MUST BE POSTMARKED NO LATER THANNOVEMBER 17, 2009, AND MUST BE MAILED TO:

Atlas vs Accredited Home Lenders Holding Co. Securities Litigationc/o The Garden City Group, Inc.

P.Q. Box 9397Dublin, OH 43017-4297

ACCURATE CLAIMS PROCESSING TAKES A SIGNIFICANT AMOUNTOF TIME.

THANK YOU FOR YOUR PATIENCE

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7UNITED STATES DISTRICT COURT

8SOUTHERN DISTRICT OF CALIFORNIA

9MICHAEL ATLAS and GAIL ATLAS, Case No. 3:07-cv-00488-H-CAB

10 Individually and On Behalf of All Others11 Similarly Situated,

SUMMARY NOTICE

12 Plaintiffs, EXHIBIT A-3

13 vs.

14 ACCREDITED HOME LENDERS15 HOLDING CO.; JAMES KONRATH;

JOSEPH J. LYDON; STUART D. MARVIN;16 JOHN S. BUCHANAN; DAVID E.

HERTZEL; and JEFFREY W. CRAWFORD,17

Defendants.18

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TO: ALL PERSONS AND ENTITIES WHO PURCHASED OR ACQUIRED

ACCREDITED SECURITIES BETWEEN NOVEMBER 1, 2005, AND MARCH 12, 2007,

INCLUSIVE:

YOU ARE HEREBY NOTIFIED that the above-captioned action has been certified as a

class action for purposes of a proposed settlement with Accredited Home Lenders Holding Co.

("Accredited" or the "Company"); James Konrath ("Konrath"); Joseph J. Lydon ("Lydon"); John

S. Buchanan ("Buchanan"); Stuart D. Marvin ("Marvin"); Jeffrey W. Crawford ("Crawford");

Jody A. Gunderson ("Gunderson"); Richard T. Pratt ("Pratt"), Gary M. Erickson ("Erickson");

Bowers W. Espy ("Espy"); and .lames H. Berglund ("Berglund") (collectively, the "Defendants")

(collectively "Defendants"), valued at $22 million plus interest thereon. A hearing will be held

before the Honorable Marilyn L. Huff at the United States District Court for the Southern

District of California, 940 Front Street, San Diego, CA 92101-8900 at 10:30 a.m. on

November 2, 2009, to determine (1) whether the proposed Settlement should be approved by the

Court as fair, reasonable, and adequate, (2) whether the Plan of Allocation is fair, reasonable and

adequate and therefore should be approved in connection with this Settlement, and (3) whether

the application of Lead Counsel for attorneys' fees and litigation expenses should be approved.

IF YOU ARE A MEMBER OF THE SETTLEMENT CLASS, YOUR RIGHTS WILL

BE AFFECTED BY THE SETTLEMENT, AND YOU MAY BE ENTITLED TO SHARE IN

THE SETTLEMENT FUND. If you have not yet received the (1) Notice of Pendency And

Proposed Settlement of Class Action ("Notice"); and (2) Proof of Claim and Release form

("Claim Form"), you may obtain copies of these documents by contacting: Atlas vs. Accredited

Home Lenders Holding Co. Securities Litigation, c/o The Garden City Group, Inc., P.O. Box

9397, Dublin, OH 43017-4297. Copies of the Notice and Claim Form may also be downloaded

from: www.blbglaw.com or at www.AcereditedSecuritiesLitigation.com . If you are a Settlement

Class Member, in order to be eligible to share in the distribution of the Net Settlement Fund, you

must submit a Claim Form no later than November 17, 2009, establishing that you are entitled to

a recovery. You will be bound by any judgment entered in the Action whether or not you make a

Claim.

SUMMARY NOTICECase No. 3:47-cv-004$8-H-CAB

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If you desire to be excluded from the Settlement Class, you must submit a request for

exclusion by October 13, 2009, in the manner and form explained in the Notice. All Settlement

Class Members who do not request exclusion from the Settlement Class will be bound by any

judgment entered in the Action.

Any objection to the proposed Settlement, Plan of Allocation or application for attorneys'

fees and payment of litigation expenses must be filed with the Court and delivered to counsel for

the parties no later than October 13, 2009, in the manner and form set forth in the Notice.

PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE

REGARDING THIS NOTICE. Inquiries, other than requests for the Notice and Claim Form,

may be made to Lead Counsel:

David R. StickneyNiki L. MendozaBernstein Litowitz Berger & Grossmann LLP12481 High Bluff Drive, Suite 300San Diego, CA 92130888-924-1888

Dated: 92009 By Order of the Clerk of the CourtUnited States District Courtfor the Southern District of California

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