2004 Executive Deferred Compensation Plan

1.1.

Accrued Benefit . The sum of all amounts deferred hereunder by or on behalf of a Participant, including (i) any contributions made by the Corporation, and (ii) any earnings, gains, losses, and changes in value credited to the Participant or his or her Beneficiaries pursuant to the Plan, which shall be reflected in the Deferral Account.

1.2.

Affiliate . Any corporation, partnership, joint venture, association, or similar organization or entity, which is a member of a controlled group of companies which includes, or which is under common control with, the Corporation under Section 414 of the Code, including, but not limited to, William Lyon Homes, Inc., a California corporation, and Duxford Financial, Inc., a California corporation.

1.3.

Base Salary . The annual compensation (excluding bonuses, commissions, overtime, incentive payments, non-monetary awards, directors fees and other fees, stock

1.4.

Beneficiary . The Beneficiary designated by a Participant under Article 7, or, if the Participant has not designated a Beneficiary under Article 7, the person or persons entitled to receive distributions of benefits under Section 5.5.

1.5.

Calendar Year . January 1 to December 31.

1.6.

Cause . For purposes of this Agreement “Cause” shall mean any of the following acts or circumstances: (i) willful destruction by the Participant of property of the Corporation or an Affiliate having a material value to the Corporation or such Affiliate; (ii) fraud, embezzlement, theft, or comparable dishonest activity committed by the Participant (excluding acts involving a de minimis dollar value and not related to the Corporation or an Affiliate); (iii) the Participant’s conviction of or entering a plea of guilty or nolo contendere to any crime constituting a felony or any misdemeanor involving fraud, dishonesty or moral turpitude (excluding acts involving a de minimis dollar value and not related to the Corporation or an Affiliate); (iv) the Participant’s breach, neglect, refusal, or failure to materially discharge the Participant’s duties (other than due to physical or mental illness) commensurate with the Participant’s title and function or the Participant’s failure to comply with the lawful directions of the Board or the Chief Executive Officer of the Corporation, or of the Board of Directors or the Chief Executive Officer of the Affiliate that employs the Participant, in any such case that is not cured within fifteen (15) days after the Participant has received written notice thereof from such Board of Directors or Chief Executive Officer; (v) any willful misconduct by the Participant which may cause substantial economic or reputational injury to the Corporation, including, but not limited to, sexual harassment, or (vi) a willful and knowing material misrepresentation to the Board or the Chief Executive Officer of the Corporation or to the Board of Directors or the Chief Executive Officer of the Affiliate that employs the Participant.

1.7.

Change in Control . shall have the meaning prescribed in regulations promulgated by the U.S. Treasury Department under Section 409A of the Code.

1.8.

Code . The Internal Revenue Code of 1986, as amended from time to time.

1.9.

Compensation . The Base Salary and bonuses that are earned by an employee for services to the Corporation during a Calendar Year.

1.10.

Deferral Account . Book entries maintained by the Corporation reflecting the Participant’s Accrued Benefit, provided, however, that the existence of such book entries and the Deferral Account shall not create, and shall not be deemed to create, a trust of any kind, or a fiduciary relationship between the Corporation and the Participant, his or her Beneficiaries.

1.11.

Disability . Inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to

1.12.

Effective Date . December 28, 2004, for deferral of Compensation that is earned (i.e., the services that earned such Compensation are performed) or vested after December 31, 2004.

1.13.

Election of Deferral . A written notice filed by the Participant with the Human Resources Department of the Corporation in substantially the form attached hereto as Exhibit A, the Participant Enrollment and Election Form, specifying the amount (if any) of Base Salary and bonus to be deferred.

1.14.

Eligible Employee . Any employee of the Corporation or an Affiliate who is selected to participate herein in accordance with the provisions of Section 2.1 hereof, and one of a select group of management or highly compensated employees, as defined by ERISA.

1.15.

ERISA . The Employee Retirement Income Security Act of 1974, as amended from time to time.

1.16.

Good Reason . means the occurrence, on or after the occurrence of a Change in Control, of any of the following:

(a)

The Corporation or any of its Affiliates reduces the Participant’s Base Salary.

(b)

The Corporation discontinues its bonus plan in which the Participant participates as in effect immediately before the Change in Control without immediately replacing such bonus plan with a plan that is the substantial economic equivalent of such bonus plan, or a successor to the Corporation fails or refuses to assume the obligations of the Corporation under such bonus plan as in effect immediately before the Change in Control or under a plan that is the substantial economic equivalent of such bonus plan.

(c)

Without the Participant’s express written consent, the Corporation or any of its Affiliates requires the Participant to change the location of the Participant’s job or office, so that the Participant will be based at a location more than 100 miles from the former location of the Participant’s job or office.

(d)

Without the Participant’s express written consent, the Corporation or any of its Affiliates reduces the Participant’s responsibilities or directs the Participant to report to a person of lower rank or responsibilities than the person to whom the Participant reported before the Change in Control.

1.17.

Key Employee . A key employee of the Corporation or any Affiliate, as defined in Section 416(i) of the Code without regard to paragraph (5) thereof, who is a participant in this Plan.

1.18.

Normal Retirement Date . The date the Participant attains 65 years of age.

1.19.

Participant . An Eligible Employee designated as a participant by the Plan Administrator.

1.20.

Participant Annual Deferral . The portion of a Participant’s compensation, which he or she elects to defer for the Calendar Year in question.

1.21.

Plan . This Plan, together with any and all amendments or supplements thereto.

1.22.

Plan Administrator . The Board of Directors of William Lyon Homes (a Delaware corporation) or its designee, except as provided in Section 5.8.

1.23.

Plan Year . The Calendar Year.

1.24.

Retirement . The termination of a Participant’s employment with the Corporation and all Affiliates after the Participant has reached his Normal Retirement Date.

1.25.

Valuation Date . The last day of each quarter during the Plan Year, or such other dates as the Plan Administrator may establish in its discretion.

2.1.

Eligibility .

(a)

An Eligible Employee shall become a Participant in the Plan if such Employee is designated as a Participant by the Corporation, in writing.

(b)

Once an employee becomes a Participant, he or she shall remain a Participant until his or her termination of employment with the Corporation and all Affiliates, and thereafter until all benefits to which he or she (or his or her Beneficiaries) is entitled under the Plan have been paid.

2.2.

Participation .

(a)

The Participant may elect a Participant Annual Deferral hereunder by filing an Election of Deferral. Except as provided in Sections 2.2(b) and (c), any Election of Deferral, to be effective, must be filed before the beginning of the Plan Year to which it applies, and shall be effective only for Base Salary and bonus which the Participant earns (i.e., the Participant performs the services

(b)

Any employee who becomes an Eligible Employee and is designated as a Participant by the Plan Administrator during a Plan Year may elect to participate and commence deferrals by filing an Election of Deferral within 30 days following his designation as a Participant, in which case the Election of Deferral shall be effective for Base Salary and bonus earned (i.e., the Participant performs the services that earn such Base Salary and bonus) after the date of the filing of such Election of Deferral in such Plan Year.

(c)

In the case of any bonus which is “performance-based compensation,” within the meaning of regulations promulgated by the U.S. Treasury Department under Section 409A of the Code, based on services performed over a period of at least 12 months, the Plan Administrator may permit a Participant to file an Election of Deferral applying to such bonus not later than six months before the end of such period.

(d)

Each Election of Deferral shall be irrevocable during the Plan Year to which it relates, or, if it relates to a bonus which is “performance-based compensation,” within the meaning of regulations promulgated by the U.S. Treasury Department under Section 409A of the Code, based on services performed over a period of at least 12 months, during such 12 month period.

3.1.

Deferral Election .

(a)

Commencing on the Effective Date, and continuing through the date on which the Participant’s employment terminates because of his or her death, Retirement, Disability, or any other cause, each Participant shall be entitled to elect to defer into his or her Deferral Account, by filing with the Plan Administrator an Election of Deferral, in the form set forth on Exhibit A, at the times specified in Section 2.2, a portion of the Base Salary and bonus that the Participant will earn for the period for which the Election of Deferral will be effective as set forth in Section 2.2. Such deferrals shall be accomplished by payroll deduction.

(b)

In the Election of Deferral, the Participant shall specify the amount to be deferred, which such specification may be separate for the Base Salary and the bonus, and may be expressed as a percentage of the Base Salary or bonus or as a fixed dollar amount. However, the total amount of the deferrals made by each Participant in any Calendar Year (i) shall not exceed 20% of the Participant’s total Base Salary and bonus, and (ii) shall not be less than

3.2.

Corporation Discretionary Contributions .

(a)

The Corporation may make contributions to the Plan as it may determine from time to time and may direct that such contributions be allocated among the Deferral Accounts of those Participants that it may select. If a Participant is not employed by the Corporation as of the last day of a Plan Year other than by reason of his or her Retirement, Disability or death, the Corporation Discretionary Contribution for such Plan Year shall be zero. In the event of Retirement, Disability or death, a Participant shall be credited with the Corporation Discretionary Contribution (if any) for the Plan Year in which he or she Retires, becomes Disabled or dies.

(b)

No participant shall have a right to compel the Corporation to make a discretionary contribution under this Section 3.2 and no Participant shall have the right to share in the allocation of any such contribution for any Plan Year unless selected by the Corporation, in its sole discretion.

4.1.

Deferral Account Allocations .

(a)

Compensation which is deferred under the Plan shall be deemed to be added to the Deferral Account on the first day of the following month in which the Compensation would otherwise have been paid.

(b)

Corporation Discretionary Contributions (if any) shall be credited to the Participant’s Deferral Account at such time as directed by the Plan Administrator.

(c)

All amounts paid from a Deferral Account shall be deemed to be paid on the first day of the month following the month in which such payments are made.

(d)

Based on the Investment Elections of a Participant made under Section 4.2, the Participant’s Deferral Account shall be credited with investment earnings, gains, losses or changes in value effective at the end of each calendar quarter during the Plan Year, except as otherwise provided in this Plan.

(e)

The Plan Administrator may, at any time, change the timing or methods for crediting or debiting earnings, gains, losses, and changes in value of investment options, deferrals of Compensation, Company Discretionary Contributions, and payments of benefits and withdrawals under this Plan; provided, however, that the times and methods for crediting or debiting such items in effect at any particular time shall be uniform among all Participants and Beneficiaries.

4.2.

Investment Election and Declared Rates .

(a)

Investment Elections may be made from any of the various investment alternatives selected by the Participant from among those made available by the Corporation from time to time, which are outlined in Exhibit B.

(b)

A Participant (or, in the event of the Participant’s death, the Participant’s Beneficiary) shall make Investment Elections for the Participant’s Deferral Account by filing a form substantially in the form of Exhibit B (or another form acceptable to the Plan Administrator) with the Plan Administrator. A Participant may elect to have his or her Deferral Account deemed to be invested in up to ten (10) investment alternatives, provided, however, that such investment alternative must be applied to at least 10% of the total balance in his or her Deferral Account and must be in a whole percentage amount. Investment Elections shall remain in effect until changed and may be changed once during each calendar quarter, with such change to be effective on the first day of the succeeding calendar quarter.

(c)

At the end of each calendar quarter (or such shorter period as the Plan Administrator may determine), the Corporation shall compute the total return for the quarter (or such shorter period) as to each Participant’s Investment Elections and reduce such returns for that quarter’s (or shorter period’s) money management fees, mortality charges, cost of insurance and investment expenses associated specifically with each investment alternative. The total return for each investment alternative shall be that investment alternative’s total return for that quarter (or shorter period) reduced for expenses as described above.

(d)

From time to time, and at its sole discretion, the Corporation may change the investment alternatives which it makes available to the Participant. However, notwithstanding the provisions of this Section 4.2, the Corporation may invest contributions in investments other than the investments selected by such Participant but the Participant’s return will solely be based on the results of his or her Investment Election reduced for expenses as described in Section 4.2(c) above. Nothing in this Plan shall require the Corporation actually to acquire or hold any particular investment.

4.3.

Determination of Accounts . A Participant’s Accrued Benefit and Deferral Account balance as of each Valuation Date shall consist of the balance of deferrals of Compensation, Corporation Discretionary Contributions, and investment earnings, gains, losses, and changes in value in his or her Deferral Account determined in accordance with this Section 4.

5.1.

Vesting of Benefits . The portion of a Participant’s Deferral Account that is attributable to his or her compensation deferral and deemed investment earnings, gains, losses and changes in value credited thereon shall be immediately fully vested. The portion of the Participant’s Deferral Account that is attributable to Corporation Discretionary Contributions and deemed investment earnings, gains, losses and changes in value credited thereon (if any), shall vest based on the following table:

5.2.

Retirement Benefit .

(a)

From and after the Retirement of the Participant, the Corporation shall thereafter pay to the Participant his or her Accrued Benefit, unless the Participant has validly elected a later fixed payment date under Section 5.3. Such benefits shall be payable in the manner elected by the Participant as follows:

•

Lump Sum

•

Monthly over 2 years

•

Monthly over 5 years

•

Monthly over 10 years

•

Monthly over 15 years

•

Monthly over 20 years

(b)

As of January 1 of each subsequent Calendar Year during the benefit payment period, the amount of each installment to be paid during such Calendar Year shall be recalculated and shall be equal to:

(i)

the remaining balance in the Participant’s Deferral Account as of January 1; divided by

(ii)

the number of installment payments to be made in or after such subsequent Calendar Year.

(c)

The final installment payment shall be equal to the remaining amount payable to the Participant. In no event shall the amount of any installment payment exceed the remaining amount payable to the Participant.

(d)

Notwithstanding the foregoing, a Participant’s retirement benefit will be distributed in one lump sum rather than in installments if the balance in the Participant’s Deferral Account as of his Normal Retirement Date is less than $25,000.00.

(e)

After the filing of the first Election of Deferral filed by the Participant on or after the Effective Date of this Plan, the Participant’s election of the form of payments on Retirement or Disability may be changed only in accordance with the provisions of this Section 5.2(e). In no event may a change be made that would accelerate the payment of benefits on a Participant’s Retirement or Disability. Any election by a Participant to delay payment of benefits on the Participant’s Retirement or Disability (i) cannot take effect until 12 months after the date on which the Participant makes such election, and (ii) the first payment for which such an election is made must be deferred for at least five years after the date on which such first payment would otherwise have been made.

(f)

Notwithstanding the foregoing, if any stock of this Corporation is publicly traded on established securities market or otherwise, no payment shall be made to a Key Employee within six months after such Key Employee’s separation from service (or, if earlier, the date of his or her death).

5.3.

Fixed Payment Date Benefit .

(a)

A Participant may select a fixed payment date for the payment or commencement of payment of his or her vested Accrued Benefit. Payments

(b)

Any fixed payment date elected by a Participant as provided under Section 5.3(a) above (i) may be before or after the Participant’s Retirement or termination of employment with the Corporation and all Affiliates for any reason other than Cause, Disability, Retirement, or death, but (ii) must be no earlier than the January 1 of the sixth Calendar Year after the Calendar Year in which the election is made or in which the Participant gives a written notice of extension.

5.4.

Disability Retirement Benefit . The Participant shall be entitled to receive payments hereunder prior to his or her Normal Retirement Date if he or she is Disabled. If the Participant’s employment is terminated pursuant to this Section 5.4, the benefit payable hereunder shall be the same amount as would have been payable as a Retirement Benefit under Section 5.2 above had the Participant attained his or her Normal Retirement Date on the date of the disability determination, and shall be paid on account of the Participant’s Disability even if the Participant has validly elected a later fixed payment date under Section 5.3. If the total amount of benefits payable is less than $25,000.00, the Plan Administrator will be required to pay the benefit in a lump sum rather than in installments.

5.5.

Death Benefits .

(a)

Death Benefit Prior to Commencement of Benefits . In the event of the Participant’s death while in the employment of the Corporation or an Affiliate and prior to commencement of benefit payments, the Corporation shall pay a survivor benefit in an amount equal to the greater of: (a) the Participant’s Accrued Benefit at the date of death, or (b) a specified dollar amount stated in a written notice given by the Corporation to the Participant; provided, however, that (i) the Corporation may increase, decrease or eliminate such specified dollar amount at any time by giving a written notice of such change to the Participant, and (ii) the Corporation shall not be obligated to give such notice or to specify any dollar amount under this clause (b), and, if the Corporation does not give such notice or specify any dollar amount, the specified dollar amount shall be deemed to be zero. The death benefit payable under this Section 5.5 shall be distributed to the Participant’s Beneficiary in a lump sum on or about the first day of the third month following the Participant’s date of death (even if the Participant has validly elected a later fixed payment date under Section 5.3) and based on the last Beneficiary designation received by the Corporation from the Participant prior to his or her death. If no such designation has been received by the Corporation, such payment shall be made to the Participant’s surviving legal spouse. If the Participant is not survived by a legal spouse, the said payment

(b)

Death Benefit After Commencement of Retirement Benefits . In the event of the Participant’s death after the commencement of benefit payments, but prior to the completion of such payments due to and owing hereunder, the Corporation shall continue to make such payments, in installments over the remainder of the period specified in Sections 5.2 or 5.3 hereof that would have been applicable to the Participant had he or she survived. Such continuing payment shall be made to the Participant’s designated Beneficiary in accordance with the last such designation received by the Corporation from the Participant prior to his death. If no such designation has been received by the Corporation, such payments shall be made to the Participant’s surviving legal spouse. If such spouse dies before receiving all payments to which he or she is entitled hereunder, then the balance of the Accrued Benefit shall be paid to the spouse’s estate. If the Participant is not survived by a legal spouse, then the said payments shall be made to the then living children of the Participant, if any, in equal shares. If there are no surviving children, the balance of the Accrued Benefit shall be paid to the estate of the Participant.

5.6.

Termination of Employment Benefits .

(a)

In the event of the Participant’s termination of employment with the Corporation or an Affiliate for any reason other than for Cause, Disability, Retirement or death, the Corporation shall pay to the Participant a Termination Benefit equal to the vested value of the Participant’s Accrued Benefit, unless the Participant has validly elected a later fixed payment date under Section 5.3. Such termination benefit shall be payable in a lump sum on or about the first day of the third month following the date of termination, unless (i) the Participant has validly elected a later fixed payment date under Section 5.3, or (ii) if any stock of this Corporation is publicly traded on established securities market or otherwise, no payment shall be made to a Key Employee within six months after such Key Employee’s separation from service (or, if earlier, the date of his or her death).

(b)

In the event the Participant’s employment is terminated for Cause, no benefits of any kind will be due or payable under the terms of this Plan from amounts credited to the Participant’s Deferral Account attributable to Corporate Discretionary Contributions, and any cumulative earnings, gains, and changes in value thereon, and all rights of the Participant, his or her designated Beneficiary, executors, or administrators, or any other person, to receive payments thereof shall be forfeited. If, after installment payments of benefits under this Plan have begun, the Plan Administrator determines that Cause existed before the Participant’s Retirement or Disability, such installment payments shall be reduced by amounts credited to the Participant’s Deferral Account attributable to Corporate Discretionary Contributions, and any cumulative earnings, gains, and changes in value thereon.

5.7.

Hardship Distribution .

(a)

Hardship Withdrawal . In the event that the Plan Administrator, upon the written request of a Participant, determines, in its sole discretion, that the Participant has suffered an unforeseeable financial emergency, the Corporation shall pay to the Participant, as soon as practicable following such determination, an amount necessary to meet the emergency (the “Hardship Withdrawal”), but not exceeding the vested balance of such Participant’s Deferral Account as of the date of such payment. For purposes of this Section 5.7(a), an “unforeseeable financial emergency” shall mean a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The amounts of a Hardship Withdrawal may not exceed the amount the Plan Administrator reasonably determines, under regulations issued by the U.S. Treasury Department under Section 409A of the Code, to be necessary to meet such emergency needs (including taxes incurred by reason of a taxable distribution), after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (