As filed with the Securities and Exchange Commission on May 27, 1998.
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
New Century Financial Corporation
(Exact name of registrant as specified in its charter)
___________________
Delaware 33-0683629
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18400 Von Karman Avenue, Suite 1000
Irvine, California 92612
(Address of principal executive offices)
New Century Financial Corporation 1995 Stock Option Plan
(Full title of the plan)
Brad A. Morrice
Vice Chairman, President and Secretary
New Century Financial Corporation
18400 Von Karman Avenue, Suite 1000
Irvine, California 92612
(Name and address of agent for service)
Telephone number, including area code, of agent for service: (714) 440-7030
___________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be price offering registration
to be registered registered per unit price fee
Common Stock, 500,000<1> $10.00<2> $5,000,000<2> $1,490<2>
par value $0.01 shares
per share
<FN>
<1> This Registration Statement covers, in addition to the number of shares
of Common Stock stated above, options and other rights to purchase or
acquire the shares of Common Stock covered by the Prospectus and,
pursuant to Rule 416(c) under the Securities Act of 1933, as amended (the
"Securities Act"), an indeterminate number of shares which by reason of
certain events specified in the Plan may become subject to the Plan.
<2> Pursuant to Rule 457(h), the maximum offering price, per share and in the
aggregate, and the registration fee were calculated based upon the
average of the high and low prices of the Common Stock on May 22, 1998,
as reported on the Nasdaq National Market System.
The Exhibit Index for this Registration Statement is at page S-3.
</FN>
</TABLE>
The Prospectus which contains the information required pursuant to
Section 10(a) of the Securities Act relates to Registration Statement No.
333-32709, filed on a Form S-8 under the Securities Act.
<PAGE>
PART I
INFORMATION REQUIRED IN THE
SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I of Form
S-8 (plan information and registrant information) will be sent or given to
employees as specified by Rule 428(b)(1) of the Securities Act. Such
documents need not be filed with the Securities and Exchange Commission (the
"Commission") either as part of this Registration Statement or as prospectuses
or prospectus supplements pursuant to Rule 424 of the Securities Act. These
documents, which include the statement of availability required by
Item 2 of Form S-8, and the documents incorporated by reference in this
Registration Statement pursuant to Item 3 of Form S-8 (Part II hereof), taken
together, constitute a prospectus that meets the requirements of Section 10(a)
of the Securities Act.
<PAGE>
PART II
INFORMATION REQUIRED IN THE
REGISTRATION STATEMENT
Item 3.Incorporation of Certain Documents by Reference
The following documents of New Century Financial Corporation (the
"Company") filed with the Commission are incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the Company's fiscal year
ended December 31, 1997;
(b) The Company's Quarterly Report on Form 10-Q for the Company's quarter
March 31, 1998; and
(c) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, filed with the Commission on
June 2, 1997;
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which
deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into the prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained herein or in
document, all or a portion of which is incorporated or deemed to be
incorporated by reference herein, shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or amended, to constitute a part of this
Registration Statement.
Item 4.Description of Securities
Item 5.Interests of Named Experts and Counsel
Certain matters relating to this offering are being passed upon for the
Company by O'Melveny & Myers LLP, Newport Beach, California. A partner of
such firm owns 211,032 shares of the Common Stock of the Company.
Item 6.Indemnification of Directors and Officers
Item 7.Exemption from Registration Claimed
Item 8.Exhibits
See the attached Exhibit Index on page S-3.
Item 9.Undertakings
The information and contents of Registration Statement No. 333-32709 on
Form S-8 which was previously filed with the Commission by the Company is
incorporated herein by this reference. Except for required opinions,
consents, signature pages and any information required in this Registration
Statement that is not in the above-mentioned Registration Statement, the
information required by part II to be contained in this Registration Statement
is omitted in accordance with General Instruction E to Form S-8.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on May 22, 1998.
By: /s/ Brad A. Morrice
Brad A. Morrice, Vice Chairman, President and
Secretary
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Robert K. Cole and Brad A. Morrice, or each of them individually, his true and
lawful attorney-in-fact and agent, with full powers of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them
individually, or their substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
/s/ Robert K. Cole Chairman, Chief Executive May 22, 1998
Robert K. Cole Officer and Director
(Principal Executive Officer)
/s/ Brad A. Morrice Vice Chairman, President, May 22, 1998
Brad A. Morrice Secretary and Director
/s/ Edward F. Gotschall Vice Chairman, Chief May 22, 1998
Edward F. Gotschall Operating Officer -
Finance/Administration and
Director (Principal Financial
and Accounting Officer)
/s/ Steven G. Holder Vice Chairman, Chief May 22, 1998
Steven G. Holder Operating Officer - Loan
Production/Operations and
Director
/s/ John C. Bentley Director May 22, 1998
John C. Bentley
/s/ Sherman I. Chu Director May 22, 1998
Sherman I. Chu
/s/ Martin F. Ryan Director May 22, 1998
Martin F. Ryan
/s/ Michael M. Sachs Director May 22, 1998
Michael M. Sachs
/s/ Fredric Forster Director May 22, 1998
Fredric Forster
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description
4.1 New Century Financial Corporation 1995 Stock
Option Plan.
4.2 Form of New Century Financial Corporation 1995
Stock Option Plan Restricted Stock Award
Agreement.<1>
4.3 Form of New Century Financial Corporation 1995
Stock Option Plan Incentive Stock Option
Agreement.<1>
4.4 Form of New Century Financial Corporation 1995
Stock Option Plan Nonqualified Stock Option
Agreement.<1>
4.5 Form of Non-Employee Director Nonqualified
Stock Option Agreement.<1>
5. Opinion of Counsel (opinion re legality).
23.1 Consent of KPMG Peat Marwick LLP (consent of
independent auditors).
23.2 Consent of Counsel (included in Exhibit 5).
24. Power of Attorney (included in this
Registration Statement under "Signatures").
<FN>
<1> Each exhibit index and exhibit of Registration Statement No. 333-32709
on Form S-8, which was previously filed with the Commission by the
Company, is incorporated herein by this reference.
</FN>
</TABLE>
NEW CENTURY FINANCIAL CORPORATION
1995 STOCK OPTION PLAN
(Amended and Restated May 30, 1997)
Composite Plan document reflecting the First Amendment to the Plan,
adopted March 19, 1998 and approved by shareholders May 18, 1998.
<PAGE>
TABLE OF CONTENTS
Page
I. THE PLAN . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . 1
1.2 Administration. . . . . . . . . . . . . . . . 1
1.3 Participation . . . . . . . . . . . . . . . . 2
1.4 Shares Available Under the Plan . . . . . . . 2
1.5 Grant of Awards . . . . . . . . . . . . . . . 3
1.6 Exercise of Awards. . . . . . . . . . . . . . 3
1.7 No Transferability; Limited Exception to
Transfer Restrictions . . . . . . . . . . . . 3
II. OPTIONS. . . . . . . . . . . . . . . . . . . . . . 4
2.1 Grants. . . . . . . . . . . . . . . . . . . . 4
2.2 Option Price. . . . . . . . . . . . . . . . . 4
2.3 Option Period . . . . . . . . . . . . . . . . 5
2.4 Exercise of Options . . . . . . . . . . . . . 5
2.5 Limitations on Grant of Incentive Stock
Options . . . . . . . . . . . . . . . . . . . 6
2.6 Non-Employee Director Awards. . . . . . . . . 6
III. STOCK APPRECIATION RIGHTS. . . . . . . . . . . . . 8
3.1 Grants. . . . . . . . . . . . . . . . . . . . 8
3.2 Exercise of Stock Appreciation Rights . . . . 9
3.3 Payment . . . . . . . . . . . . . . . . . . . 9
IV. RESTRICTED STOCK AWARDS. . . . . . . . . . . . . . 10
4.1 Grants. . . . . . . . . . . . . . . . . . . . 10
4.2 Restrictions. . . . . . . . . . . . . . . . . 10
V. PERFORMANCE SHARE AWARDS . . . . . . . . . . . . . 11
5.1 Grants of Performance Share Awards. . . . . . 11
5.2 Grants of Performance-Based Share Awards. . . 11
VI. OTHER PROVISIONS . . . . . . . . . . . . . . . . . 13
6.1 Rights of Eligible Employees, Participants
and Beneficiaries . . . . . . . . . . . . . . 13
6.2 Adjustments Upon Changes in Capitalization. . 14
6.3 Termination of Employment . . . . . . . . . . 15
6.4 Acceleration of Awards. . . . . . . . . . . . 17
6.5 Government Regulations. . . . . . . . . . . . 17
6.6 Tax Withholding . . . . . . . . . . . . . . . 18
6.7 Amendment, Termination and Suspension . . . . 18
6.8 Privileges of Stock Ownership . . . . . . . . 19
6.9 Effective Date of the Plan. . . . . . . . . . 19
6.10 Term of the Plan. . . . . . . . . . . . . . . 19
6.11 Governing Law . . . . . . . . . . . . . . . . 20
6.12 Plan Construction . . . . . . . . . . . . . . 20
6.13 Non-Exclusivity of Plan . . . . . . . . . . . 20
VII. DEFINITIONS. . . . . . . . . . . . . . . . . . . . 20
7.1 Definitions . . . . . . . . . . . . . . . . . 20
<PAGE>
NEW CENTURY FINANCIAL CORPORATION
1995 STOCK OPTION PLAN
(Amended and Restated May 30, 1997)
I. THE PLAN.
1.1 Purpose.
The purpose of this Plan is to promote the success of the
Company by providing an additional means to attract,
motivate and retain key personnel, consultants, advisors and
knowledgeable directors through the grant of Options and
other Awards that provide added long term incentives for
high levels of performance and for significant efforts to
improve the financial performance of the Company.
Capitalized terms are defined in Article VII.
1.2 Administration.
(a) This Plan shall be administered by the Committee.
Action of the Committee with respect to the administration
of this Plan shall be taken pursuant to a majority vote or
the unanimous written consent of its members. In the event
action by the Committee is taken by written consent, the
action shall be deemed to have been taken at the time
specified in the consent or, if none is specified, at the
time of the last signature. The Committee may delegate
administrative functions to individuals who are officers or
employees of the Company.
(b) Subject to the express provisions of this Plan, the
Committee shall have the authority to construe and interpret
this Plan and any agreements defining the rights and
obligations of the Company and Participants under this Plan,
to further define the terms used in this Plan, to prescribe,
amend and rescind rules and regulations relating to the
administration of this Plan, to determine the duration and
purposes of leaves of absence which may be granted to
Participants without constituting a termination of their
employment or consulting services for purposes of this Plan,
to accelerate or extend the exercisability or extend the
term of any or all outstanding Awards within the maximum
term of such Awards required by Section 2.3 or applicable
law, and to make all other determinations necessary or
advisable for the administration of this Plan. The
determination of the Committee on any of the foregoing
matters shall be conclusive.
(c) Any action taken by, or inaction of, the Company, any
Subsidiary, the Board or the Committee relating to this Plan
shall be within the absolute discretion of that entity or
body. No member of the Board or Committee, or officer of
the Company or any Subsidiary, shall be liable for any such
action or inaction.
(d) In making any determination or in taking or not
taking any action under this Plan, the Company, any
Subsidiary, the Board or the Committee may obtain and rely
upon the advice of experts, including professional advisors
to the Company. No member of the Board or Committee, or
officer of the Company or any Subsidiary, shall be liable
for any such action or determination made or omitted.
(e) Subject to the requirements of Section 7.1(h), the
Board, at any time it so desires, may increase or decrease
the number of members of the Committee, may remove from
membership on the Committee all or any portion of its
members, and may appoint such person or persons as it
desires to fill any vacancy existing on the Committee,
whether caused by removal, resignation or otherwise.
1.3 Participation.
Awards may be granted only to Eligible Employees. An
Eligible Employee who has been granted an Award may, if
otherwise eligible, be granted additional Awards if the
Committee shall so determine. Except as provided in Section
2.6 below, members of the Board who are not officers or
employees of the Company shall not be eligible to receive
Awards.
1.4 Shares Available Under the Plan.
Subject to the provisions of Section 6.2, the capital
stock that may be delivered under this Plan shall be shares
of the Company's authorized but unissued Common Stock and
any shares of its Common Stock held as treasury shares. The
aggregate maximum number of shares of Common Stock that may
be issued or transferred pursuant to Awards (including
Incentive Stock Options) granted under this Plan shall not
exceed 2,500,000 shares. The maximum number of shares of
Common Stock that may be delivered pursuant to options
qualified as Incentive Stock Options granted under the Plan
is 2,500,000 shares. The maximum number of shares that may
be subject to Options and Stock Appreciation Rights that are
granted during any calendar year to any individual shall not
exceed 500,000 shares. Each of the foregoing numerical
limits shall be subject to adjustment as contemplated by
this Section 1.4 and Section 6.2. If any Option and any
related Stock Appreciation Right shall lapse or be cancelled
or terminate without having been exercised in full, or any
Common Stock subject to a Restricted Stock Award shall not
vest or any Common Stock subject to a Performance Share
Award shall not have been transferred, the unpurchased,
unvested or nontransferred shares subject thereto shall
again be available for purposes of this Plan.
1.5 Grant of Awards.
Subject to the express provisions of this Plan, the
Committee shall determine from the class of Eligible
Employees those individuals to whom Awards under this Plan
shall be granted, the terms of Awards (which need not be
identical) and the number of shares of Common Stock subject
to each Award. Each Award shall be subject to the terms and
conditions set forth in this Plan and such other terms and
conditions established by the Committee as are not
inconsistent with the purpose and provisions of this Plan.
The grant of an Award is made on the Award Date.
1.6 Exercise of Awards.
An Option or Stock Appreciation Right shall be deemed to
be exercised when the Secretary of the Company receives
written notice of such exercise from the Participant,
together with payment of the purchase price made in
accordance with Section 2.2(a), except to the extent payment
may be permitted to be made following delivery of written
notice of exercise in accordance with Section 2.2(b).
Notwithstanding any other provision of this Plan, the
Committee may impose, by rule and in Awards Agreements, such
conditions upon the exercise of Awards (including, without
limitation, conditions limiting the time of exercise to
specified periods) as may be required to satisfy applicable
regulatory requirements.
1.7 No Transferability; Limited Exception to Transfer
Restrictions.
(a) Unless otherwise expressly provided below (or
pursuant to) this Section 1.7, by applicable law and by the
Award Agreement, as the same may be amended, (i) all Awards
are non-transferable and shall not be subject in any manner
to sale, transfer, anticipation, alienation, assignment,
pledge, encumbrance or charge; Awards shall be exercised
only by the Participant; and (ii) amounts payable or shares
issuable pursuant to an Award shall be delivered only to (or
for the account of) the Participant.
(b) The Committee may permit Awards to be exercised by
and paid to certain persons or entities related to the
Participant, including but not limited to members of the
Participant's immediate family and/or charitable
institutions, or to such other persons or entities as may be
approved by the Committee, pursuant to such conditions and
procedures as the Committee may establish. Any permitted
transfer shall be subject to the condition that the
Committee receive evidence satisfactory to it that the
transfer is being made for estate and/or tax planning
purposes on a gratuitous or donative basis and without
consideration (other than minimal consideration).
Notwithstanding the foregoing, Incentive Stock Options and
Restricted Stock Awards shall be subject to any and all
additional transfer restrictions under the Code.
(c) The exercise and transfer restrictions in Section
1.7(a) shall not apply to:
(i) transfers to the Company;
(ii) the designation of a beneficiary to receive
benefits in the event of the Participant's death or, if the
Participant has died, transfers to or exercise by the
Participant's beneficiary, or in the absence of a validly
designated beneficiary, transfers by will or the laws of
descent and distribution;
(iii) transfers pursuant to a QDRO order if approved
or ratified by the Committee;
(iv) if the Participant has suffered a Total
Disability, permitted transfers or exercises on behalf of
the Participant by his legal representative;
(v) the authorization by the Committee of "cashless
exercise" procedures with third parties who provide
financing for the purpose of (or who otherwise facilitate)
the exercise of Awards consistent with applicable laws and
the express authorization of the Committee.
II. OPTIONS.
2.1 Grants.
One or more Options may be granted to any Eligible
Employee. Each Option so granted shall be designated by the
Committee as either a Nonqualified Stock Option or an
Incentive Stock Option; provided, however, that consultants
or advisors may not be granted Incentive Stock Options under
the Plan.
2.2 Option Price.
(a) The purchase price per share of Common Stock covered
by each Option shall be determined by the Committee, but in
the case of Incentive Stock Options shall not be less than
100% (110% in the case of a Participant who owns more than
10% of the total combined voting power of all classes of
stock of the Company) of the Fair Market Value of the Common
Stock on the date the Incentive Stock Option is granted.
The purchase price of any shares purchased shall be paid in
full at the time of each purchase in one or a combination of
the following methods: (i) in cash or by check payable to
the order of the Company, (ii) if authorized by the
Committee or specified in the Option being exercised, by a
promissory note made by the Participant in favor of the
Company, upon the terms and conditions determined by the
Committee, and secured by the Common Stock issuable upon
exercise in compliance with applicable law (including,
without limitation, state corporate law and federal margin
requirements) or (iii) if authorized by the Committee or
specified in the Option being exercised, by shares of Common
Stock of the Company already owned by the Participant;
provided, however, that any shares delivered which were
initially acquired upon exercise of a stock option must have
been owned by the Participant at least six months as of the
date of delivery. Shares of Common Stock used to satisfy
the exercise price of an Option shall be valued at their
Fair Market Value on the date of exercise.
(b) In addition to the payment methods described in
subsection (a), the Option may provide that the Option can
be exercised and payment made by delivering a properly
executed exercise notice together with irrevocable
instructions to a bank or broker to promptly deliver to the
Company the amount of sale or loan proceeds necessary to pay
the exercise price and, unless otherwise allowed by the
Committee, any applicable tax withholding under Section 6.6.
The Company shall not be obligated to deliver certificates
for the shares unless and until it receives full payment of
the exercise price therefor.
2.3 Option Period.
Each Option and all rights or obligations thereunder shall
expire on such date as shall be determined by the Committee,
but not later than 10 years after the Award Date, and shall
be subject to earlier termination as hereinafter provided.
2.4 Exercise of Options.
(a) Subject to Sections 6.2 and 6.4, an Option may become
exercisable or vest, in whole or in part, on the date or
dates specified in the Award Agreement and thereafter shall
remain exercisable until the expiration or earlier
termination of the Option. An Option may be exercisable or
vest on the Award Date.
(b) The Committee may, at any time after grant of the
Option and from time to time, increase the number of shares
exercisable at any time so long as the total number of
shares subject to the Option is not increased. No Option
shall be exercisable except in respect of whole shares, and
fractional share interests shall be disregarded. Not less
than 10 shares of Common Stock may be purchased at one time
unless the number purchased is the total number at the time
available for purchase under the terms of the Option.
2.5 Limitations on Grant of Incentive Stock Options.
(a) To the extent that the aggregate fair market value of
stock with respect to which incentive stock options first
become exercisable by a Participant in any calendar year
exceeds $100,000, taking into account both Common Stock
subject to Incentive Stock Options under this Plan and stock
subject to incentive stock options under all other plans of
the Company, such options shall be treated as nonqualified
stock options. For purposes of determining whether the
$100,000 limit is exceeded, the fair market value of stock
subject to options shall be determined as of the date the
options are awarded. In reducing the number of options
treated as incentive stock options to meet the $100,000
limit, the most recently granted options shall be reduced
first. To the extent a reduction of simultaneously granted
options is necessary to meet the $100,000 limit, the Company
may, in the manner and to the extent permitted by law,
designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive
Stock Option.
(b) There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and
conditions as are required in order that the Option be an
"incentive stock option" as that term is defined in Section
422 of the Code.
(c) No Incentive Stock Option may be granted to any
person who, at the time the Incentive Stock Option is
granted, owns shares of outstanding Common Stock possessing
more than 10% of the total combined voting power of all
classes of stock of the Company, unless the exercise price
of such Option is at least 110% of the Fair Market Value of
the stock subject to the Option and such Option by its terms
is not exercisable after the expiration of five years from
the date such Option is granted.
2.6 Non-Employee Director Awards.
(a) Participation. Awards under this Section 2.6 shall
be made only to Non-Employee Directors.
(b) Option Grants. Each Non-Employee Director who is
elected to the Board in May 1997 shall be granted a
Nonqualified Stock Option (the Award Date of which shall be
the date of such annual meeting) to purchase 15,000 shares
of Common Stock. Subsequent to such election, upon an
individual's initial election to the Board as a Non-Employee
Director (or initial appointment to the Board as a Non-
Employee Director), such Non-Employee Director shall be
granted a Nonqualified Stock Option (the Award Date of which
shall be the date of such election or appointment) to
purchase 15,000 shares of Common Stock.
(c) Option Price. The purchase price per share of the
Common Stock covered by each Option granted pursuant to this
Section 2.6 shall be one hundred percent of the Fair Market
Value of the Common Stock on the Award Date. The purchase
price of any shares purchased shall be paid in full at the
time of each purchase in cash or by check or in shares of
Common Stock valued at their Fair Market Value on the
business day next preceding the date of exercise of the
Option, or partly in such shares and partly in cash.
(d) Option Period. Each Option granted under this
Section 2.6 and all rights or obligations thereunder shall
expire on the tenth anniversary of the Award Date and shall
be subject to earlier termination as provided below.
(e) Exercise of Options. Except as otherwise provided in
the applicable Award Agreement and Sections 2.6(f) and
2.6(g), each Option granted under this Section 2.6 shall
become exercisable according to the following schedule: (i)
one-third of the total number of shares subject to the
Option shall become exercisable on the first anniversary of
the Award Date, (ii) an additional one-third of the total
number of shares subject to the Option shall become
exercisable on the second anniversary of the Award Date, and
(iii) the remaining number of shares subject to the Option
shall become exercisable on the third anniversary of the
Award Date. Notwithstanding the foregoing, the vesting and
exercisability of Options granted to Non-Employee Directors
prior to May 24, 1997 shall be governed by the terms of this
Section 2.6(e) as it existed prior to such date.
(f) Termination of Directorship. If a Non-Employee
Director Participant's services as a member of the Board
terminate, each Option granted pursuant to Section 2.6(b)
hereof held by such Non-Employee Director Participant which
is not then exercisable shall terminate; provided, however,
that if a Non-Employee Director Participant's services as a
member of the Board terminate by reason of death or Total
Disability, either the Board or the Committee may, in its
discretion, consider to be exercisable a greater portion of
any such Option than would otherwise be exercisable, upon
such terms as the Board or the Committee shall determine.
If a Non-Employee Director Participant's services as a
member of the Board terminate by reason of death or Total
Disability, any portion of any such Option which is then
exercisable may be exercised for one year after the date of
such termination or the balance of such Option's term,
whichever period is shorter. If a Non-Employee Director
Participant's services as a member of the Board terminate
for any other reason, any portion of any such Option which
is then exercisable may be exercised for six months after
the date of such termination or the balance of such Option's
term, whichever period is shorter.
(g) Acceleration Upon an Event. Immediately prior to the
occurrence of an Event, in order to protect the holders of
Options granted under this Section 2.6, each Option granted
under Section 2.6(b) hereof shall become exercisable in
full.
(h) Adjustments. The specific number of shares stated in
the foregoing Section 2.6(b) hereof and the consideration
payable for such shares shall be subject to adjustment in
certain events as provided in Section 6.2 of this Plan.
III. STOCK APPRECIATION RIGHTS.
3.1 Grants.
In its discretion, the Committee may grant Stock
Appreciation Rights concurrently with the grant of Options.
A Stock Appreciation Right shall extend to all or a portion
of the shares covered by the related Option. A Stock
Appreciation Right shall entitle the Participant who holds
the related Option, upon exercise of the Stock Appreciation
Right and surrender of the related Option, or portion
thereof, to the extent the Stock Appreciation Right and
related Option each were previously unexercised, to receive
payment of an amount determined pursuant to Section 3.3.
Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be
required to comply with the provisions of Section 422 of the
Code and the regulations promulgated thereunder. In its
discretion, the Committee may also grant Stock Appreciation
Rights independently of any Option subject to such
conditions as the Committee may in its absolute discretion
provide.
3.2 Exercise of Stock Appreciation Rights.
(a) A Stock Appreciation Right granted concurrently with
an Option shall be exercisable only at such time or times,
and to the extent, that the related Option shall be
exercisable and only when the Fair Market Value of the stock
subject to the related Option exceeds the exercise price of
the related Option.
(b) In the event that a Stock Appreciation Right granted
concurrently with an Option is exercised, the number of
shares of Common Stock subject to the related Option shall
be charged against the maximum amount of Common Stock that
may be issued or transferred pursuant to Awards under this
Plan. The number of shares subject to the Stock
Appreciation Right and the related Option of the Participant
shall also be reduced by such number of shares.
(c) If a Stock Appreciation Right granted concurrently
with an Option extends to less than all the shares covered
by the related Option and if a portion of the related Option
is thereafter exercised, the number of shares subject to the
unexercised Stock Appreciation Right shall be reduced only
if and to the extent that the remaining number of shares
covered by such related Option is less than the remaining
number of shares subject to such Stock Appreciation Right.
(d) A Stock Appreciation Right granted independently of
any Option shall be exercisable pursuant to the terms of the
Award Agreement.
3.3 Payment.
(a) Upon exercise of a Stock Appreciation Right and
surrender of an exercisable portion of the related Option,
the Participant shall be entitled to receive payment of an
amount determined by multiplying
(i) the difference obtained by subtracting the
exercise price per share of Common Stock under the
related Option from the Fair Market Value of a share of
Common Stock on the date of exercise of the Stock Appreciation
Right, by
(ii) the number of shares with respect to which the
Stock Appreciation Right shall have been exercised.
(b) The Committee, in its sole discretion, may settle the
amount determined under paragraph (a) above solely in cash,
solely in shares of Common Stock (valued at Fair Market
Value on the date of exercise of the Stock Appreciation
Right), or partly in such shares and partly in cash,
provided that the Committee shall have determined that such
exercise and payment are consistent with applicable law. In
any event, cash shall be paid in lieu of fractional shares.
Absent a determination to the contrary, all Stock
Appreciation Rights shall be settled in cash as soon as
practicable after exercise. The exercise price for the
Stock Appreciation Right shall be the exercise price of the
related Option. Notwithstanding the foregoing, the
Committee may, in the Award Agreement, determine the maximum
amount of cash or stock or a combination thereof which may
be delivered upon exercise of a Stock Appreciation Right.
(c) Upon exercise of a Stock Appreciation Right granted
independently of any Option, the Participant shall be
entitled to receive payment of an amount based on a
percentage, specified in the Award Agreement, of the
difference obtained by subtracting the Fair Market Value per
share of Common Stock on the Award Date from the Fair Market
Value per share of Common Stock on the date of exercise of
the Stock Appreciation Right. Such amount shall be paid as
described in paragraph (b) above.
IV. RESTRICTED STOCK AWARDS.
4.1 Grants.
Subject to Section 1.4, the Committee may, in its
discretion, grant one or more Restricted Stock Awards to any
Eligible Employee. Each Restricted Stock Award agreement
shall specify the number of shares of Common Stock to be
issued to the Participant, the date of such issuance, the
price, if any, to be paid for such shares by the Participant
and the restrictions imposed on such shares, which
restrictions shall not terminate earlier than six months
after the Award Date.
4.2 Restrictions.
(a) Shares of Common Stock included in Restricted Stock
Awards may not be sold, assigned, transferred, pledged or
otherwise disposed of or encumbered, either voluntarily or
involuntarily, until such shares have vested.
(b) Participants receiving Restricted Stock shall be
entitled to dividend and voting rights for the shares issued
even though they are not vested, provided that such rights
shall terminate immediately as to any forfeited Restricted
Stock.
(c) In the event that the Participant shall have paid
cash in connection with the Restricted Stock Award, the
Award Agreement shall specify whether and to what extent
such cash shall be returned upon a forfeiture (with or
without an earnings factor).
V. PERFORMANCE SHARE AWARDS.
5.1 Grants of Performance Share Awards.
The Committee may, in its discretion, grant Performance
Share Awards to Eligible Employees based upon such factors
as the Committee shall determine. A Performance Share Award
agreement shall specify the number of shares of Common Stock
(if any) subject to the Performance Share Award, the price,
if any, to be paid for any such shares by the Participant
and the conditions upon which payment or issuance to the
Participant shall be based. The amount of cash or shares or
other property that may be deliverable pursuant to a
Performance Share Award shall be based upon the degree of
attainment over a specified period of not more than 10 years
(a "performance cycle") as may be established by the
Committee of such measure(s) of the performance of the
Company (or any part thereof) or the Participant as may be
established by the Committee. The Committee may provide for
full or partial credit, prior to completion of such
performance cycle or the attainment of the performance
achievement specified in the Award in the event of the
Participant's death, Retirement, or Total Disability, an
Event or in such other circumstances as the Committee,
consistent with Section 6.12, may determine.
5.2 Grants of Performance-Based Share Awards.
Without limiting the generality of the foregoing, and in
addition to Options and Stock Appreciation Rights granted
under other provisions of this Plan which are intended to
satisfy the exception for "performance-based compensation"
under Section 162(m) of the Code (with such Awards
hereinafter referred to as "Qualifying Options" or
"Qualifying Stock Appreciation Rights," respectively), other
performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), whether in
the form of Cash-Based Awards, restricted stock, performance
stock, phantom stock or other rights, the grant, vesting,
exercisability, or payment of which depends on the degree of
achievement of the Performance Goals relative to
preestablished targeted levels for the Company or a
consolidated segment, subsidiary, or division of the
Company, may be granted under this Plan. Any Qualifying
Option or Qualifying Stock Appreciation Right shall be
subject only to the requirements of subsections (a) and (c)
below in order for such Awards to satisfy the requirements
for Performance-Based Awards under this Section 5.2. With
the exception of any Qualifying Option or Qualifying Stock
Appreciation Right, an Award that is intended to satisfy the
requirements of this Section 5.2 shall be designated as a
Performance-Based Award at the time of grant.
(a) The eligible class of persons for Performance-Based
Awards under this Section shall be executive officers of the
Company.
(b) The applicable performance goals for Performance-
Based Awards (other than Qualifying Options) shall be, on an
absolute or relative basis, one or more of the Performance
Goals, as selected by the Committee in its sole discretion.
The Committee shall establish in the applicable Award
Agreement the specific performance targets(s) relative to
the Performance Goal(s) which must be attained before the
compensation under the Performance-Based Award becomes
payable. The specific targets shall be determined within
the time period permitted under Section 162(m) of the Code
(and any regulations issued thereunder) so that such targets
are considered to be preestablished and so that the
attainment of such targets is substantially uncertain at the
time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10
years.
(c) Notwithstanding any other provision of the Plan to
the contrary, the maximum number of shares of Common Stock
which may be delivered pursuant to Awards qualified as
Performance-Based Awards to any Participant in any calendar
year shall not exceed 500,000 shares, either individually or
in the aggregate, subject to adjustment as provided in
Section 6.2. Awards that are cancelled during the year
shall be counted against this limit to the extent required
by Section 162(m) of the Code. In addition, the aggregate
amount of compensation to be paid to any Participant in any
calendar year in respect of any Cash-Based Awards granted
during any calendar year as Performance-Based Awards shall
not exceed $1,000,000.
(d) Before any Performance-Based Award under this Section
5.2 is paid (other than a Qualifying Option or Qualifying
Stock Appreciation Right), the Committee must certify in
writing that the Performance Goals and any other material
terms of the Performance-Based Award were satisfied;
provided, however, that a Performance-Based Award may be
paid without regard to the satisfaction of the applicable
Performance Goal(s) with respect to an Event in accordance
with Section 6.4.
(e) The Committee will have discretion to determine the
restrictions or other limitations of the individual Awards
under this Section 5.2 (including the authority to reduce
Awards, payouts or vesting or to pay no Awards, in its sole
discretion, if the Committee preserves such authority at the
time of grant by language to this effect in its authorizing
resolutions or otherwise).
(f) In the event of a change in corporate capitalization,
such as a stock split or stock dividend, or a corporate
transaction, such as a merger, consolidation, spinoff,
reorganization or similar event, or any partial or complete
liquidation of the Company, or any similar event consistent
with the regulations issued under Section 162(m) of the Code
including, without limitation, any material change in
accounting policies or practices affecting the Company
and/or the Performance Goals or targets, then the Committee
may make adjustments to the Performance Goals and targets
relating to outstanding Performance-Based Awards to the
extent such adjustments are made to reflect the occurrence
of such an event; provided, however, that adjustments
described in this subsection may be made only to the extent
that the occurrence of an event described herein was
unforeseen at the time the targets for a Performance-Based
Award were established by the Committee.
VI. OTHER PROVISIONS.
6.1 Rights of Eligible Employees, Participants and
Beneficiaries.
(a) Status as an Eligible Employee shall not be construed
as a commitment that any Award will be granted under this
Plan to any Eligible Employee generally.
(b) Nothing contained in this Plan (or in Award
Agreements or in any other documents related to this Plan or
to Awards) shall confer upon any Eligible Employee or
Participant any right to continue in the service or employ
of the Company or constitute any contract or agreement of
service or employment, or interfere in any way with the
right of the Company to reduce such person's compensation or
other benefits or to terminate the services or employment of
such Eligible Employee or Participant, with or without
cause, but nothing contained in this Plan or any document
related thereto shall affect any independent contractual
right of any Eligible Employee or Participant. Nothing
contained in this Plan or any document related hereto shall
influence the construction or interpretation of the
Company's Certificate of Incorporation or Bylaws regarding
service on the Board.
(c) Options payable under this Plan shall be payable in
shares and no special or separate reserve, fund or deposit
shall be made to assure payment of such Options. No
Participant, Beneficiary or other person shall have any
right, title or interest in any fund or in any specific
asset (including shares of Common Stock) of the Company by
reason of any Award granted hereunder. Neither the
provisions of this Plan (or of any documents related
hereto), nor the creation or adoption of this Plan, nor any
action taken pursuant to the provisions of this Plan shall
create, or be construed to create, a trust of any kind or a
fiduciary relationship between the Company and any
Participant, Beneficiary or other person. To the extent
that a Participant, Beneficiary or other person acquires a
right to receive an Award hereunder, such right shall be no
greater than (and will be subordinate to) the right of any
unsecured general creditor of the Company.
6.2 Adjustments Upon Changes in Capitalization.
(a) If the outstanding shares of Common Stock are changed
into or exchanged for cash or a different number or kind of
shares or securities of the Company or of another issuer, or
if additional shares or new or different securities are
distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger to which
the Company is a party, or through a combination,
consolidation, recapitalization, reclassification, stock
split, stock dividend, reverse stock split, stock
consolidation or other capital change or adjustment, an
appropriate adjustment shall be made in the number and kind
of shares or other consideration that is subject to or may
be delivered under this Plan and pursuant to outstanding
Awards. A corresponding adjustment to the consideration
payable with respect to Awards granted prior to any such
change and to the price, if any, paid in connection with
Restricted Stock Awards or Performance Share Awards shall
also be made. Any such adjustment, however, shall be made
without change in the total payment, if any, applicable to
the portion of the Award not exercised but with a
corresponding adjustment in the price for each share.
Corresponding adjustments shall be made with respect to
Stock Appreciation Rights based upon the adjustments made to
the Options to which they are related or, in the case of
Stock Appreciation Rights granted independently of any
Option, based upon the adjustments made to Common Stock.
(b) Upon the dissolution or liquidation of the Company,
or upon a reorganization, merger or consolidation of the
Company with one or more corporations as a result of which
the Company is not the surviving corporation, the Plan shall
terminate. Notwithstanding the foregoing, the Committee may
provide in writing in connection with, or in contemplation
of, any such transaction for any or all of the following
alternatives (separately or in combinations): (i) for the
assumption by the successor corporation of the Awards
theretofore granted or the substitution by such corporation
for such Awards of Awards covering the stock of the
successor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of
shares and prices; (ii) for the continuance of this Plan by
such successor corporation in which event this Plan and the
Options shall continue in the manner and under the terms so
provided; or (iii) for the payment in cash or shares of
Common Stock in lieu of and in complete satisfaction of such
Awards.
(c) In adjusting Awards to reflect the changes described
in this Section 6.2, or in determining that no such
adjustment is necessary, the Committee may rely upon the
advice of independent counsel and accountants of the
Company, and the determination of the Committee shall be
conclusive. No fractional shares of stock shall be issued
under this Plan on account of any such adjustment.
6.3 Termination of Employment.
(a) If the Participant's service to or employment by the
Company terminates for any reason other than Retirement,
death or Total Disability, the Participant shall have,
subject to earlier termination pursuant to or as
contemplated by Section 2.3, thirty days or such shorter
period as is provided in the Award Agreements from the date
of termination of services or employment to exercise any
Option to the extent it shall have become exercisable on the
date of termination of employment, and any Option not
exercisable on that date shall terminate. Notwithstanding
the preceding sentence, in the event the Participant is
discharged for cause as determined by the Committee in its
sole discretion, all Options shall lapse immediately upon
such termination of services or employment.
(b) If the Participant's service to or employment by the
Company terminates as a result of Retirement or Total
Disability, the Participant or Participant's Personal
Representative, as the case may be, shall have, subject to
earlier termination pursuant to or as contemplated by
Section 2.3, 3 months or such shorter period as is provided
in the Award Agreements from the date of termination of
services or employment to exercise any Option to the extent
it shall have become exercisable by the date of termination
of services or employment and any Option not exercisable on
that date shall terminate.
(c) If the Participant's service to or employment by the
Company terminates as a result of death while the
Participant is rendering services to the Company or is
employed by the Company or during the 3 month period
referred to in subsection (b) above, the Participant's
Option shall be exercisable by the Participant's
Beneficiary, subject to earlier termination pursuant to or
as contemplated by Section 2.3, during the 3 month period or
such shorter period as is provided in the Award Agreements
following the Participant's death, as to all or any part of
the shares of Common Stock covered thereby to the extent
exercisable on the date of death (or earlier termination).
(d) Each Stock Appreciation Right granted concurrently
with an Option shall have the same termination provisions
and exercisability periods as the Option to which it
relates. The termination provisions and exercisability
periods of any Stock Appreciation Right granted
independently of an Option shall be established in
accordance with Section 3.2(d). The exercisability period
of a Stock Appreciation Right shall not exceed that provided
in Section 2.3 or in the related Award Agreement and the
Stock Appreciation Right shall expire at the end of such
exercisability period.
(e) In the event of termination of services to or
employment with the Company for any reason, (i) shares of
Common Stock subject to the Participant's Restricted Stock
Award shall be forfeited in accordance with the provisions
of the related Award Agreement to the extent such shares
have not become vested on that date; and (ii) shares of
Common Stock subject to the Participant's Performance Share
Award shall be forfeited in accordance with the provisions
of the related Award Agreement to the extent such shares
have not been issued or become issuable on that date.
(f) In the event of termination of services to or
employment with the Company for any reason, other than
discharge for cause, the Committee may, in its discretion,
increase the portion of the Participant's Award available to
the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, upon such terms as the
Committee shall determine.
(g) If an entity ceases to be a Subsidiary, such action
shall be deemed for purposes of this Section 6.3 to be a
termination of services or employment of each consultant or
employee of that entity who does not continue as a
consultant or as an employee of another entity within the
Company.
(h) Upon forfeiture of a Restricted Stock Award pursuant
to this Section 6.3, the Participant, or his or her
Beneficiary or Personal Representative, as the case may be,
shall transfer to the Company the portion of the Restricted
Stock Award not vested at the date of termination of
services or employment, without payment of any consideration
by the Company for such transfer unless the Participant paid
a purchase price in which case repayment, if any, of that
price shall be governed by the Award Agreement.
Notwithstanding any such transfer to the Company, or
failure, refusal or neglect to transfer, by the Participant,
or his or her Beneficiary or Personal Representative, as the
case may be, such nonvested portion of any Restricted Stock
Award shall be deemed transferred automatically to the
Company on the date of termination of services or
employment. The Participant's original acceptance of the
Restricted Stock Award shall constitute his or her
appointment of the Company and each of its authorized
representatives as attorney(s)-in-fact to effect such
transfer and to execute such documents as the Company or
such representatives deem necessary or advisable in
connection with such transfer.
6.4 Acceleration of Awards.
(a) Unless prior to an Event the Board determines that,
upon its occurrence, there shall be no acceleration of
Awards or determines those selected Awards which shall be
accelerated and the extent to which they shall be
accelerated, upon the occurrence of an Event (i) each Option
and each related Stock Appreciation Right shall become
immediately exercisable to the full extent theretofore not
exercisable, (ii) Restricted Stock shall immediately vest
free of restrictions and (iii) the number of shares covered
by each Performance Share Award shall be issued to the
Participant; subject, however, to compliance with applicable
regulatory requirements, including without limitation
Section 422 of the Code. For purposes of this section only,
the Board shall mean the Board as constituted immediately
prior to the Event.
(b) If any Option or other right to acquire Common Stock
under this Plan has been fully accelerated as permitted by
Section 6.4(a) but is not exercised prior to (i) a
dissolution of the Corporation, or (ii) an event described
in Section 6.2 that the Corporation does not survive, such
Option or right shall thereupon terminate, subject to any
provision that has been expressly made by the Committee
pursuant to Section 6.2(b) for the survival, substitution,
exchange or other settlement of such Option or right.
6.5 Government Regulations.
This Plan, the granting and vesting of Awards under this
Plan and the issuance or transfer of shares of Common Stock
(and/or the payment of money) pursuant thereto are subject
to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state
and federal securities law and federal margin requirements)
and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for
the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall
be subject to such restrictions, and the person acquiring
such securities shall, if requested by the Company, provide
such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance
with all applicable legal requirements.
6.6 Tax Withholding.
(a) Upon the disposition by a Participant or other person
of shares of Common Stock acquired pursuant to the exercise
of an Incentive Stock Option prior to satisfaction of the
holding period requirements of Section 422 of the Code, or
upon the exercise of a Nonqualified Stock Option, the
exercise of a Stock Appreciation Right, the vesting of a
Restricted Stock Award or the payment of a Performance Share
Award the Company shall have the right at its option to
(i) require such Participant or such other person to pay by
cash or check payable to the Company, the amount of any
taxes which the Company may be required to withhold with
respect to such transactions or (ii) deduct from amounts
paid in cash the amount of any taxes which the Company may
be required to withhold with respect to such cash amounts.
The above notwithstanding, in any case where a tax is
required to be withheld in connection with the issuance or
transfer of shares of Common Stock under this Plan, the
Participant may elect, pursuant to such rules as the
Committee may establish, to have the Company reduce the
number of such shares issued or transferred by the
appropriate number of shares to accomplish such withholding.
(b) The Committee may, in its discretion, permit a loan
from the Company to a Participant in the amount of any taxes
which the Company may be required to withhold with respect
to shares of Common Stock received pursuant to a transaction
described in subsection (a) above. Such a loan will be for
a term, at a rate of interest and pursuant to such other
terms and rules as the Committee may establish.
6.7 Amendment, Termination and Suspension.
(a) The Board may, at any time, terminate or, from time
to time, amend, modify or suspend this Plan (or any part
hereof). In addition, the Committee may, from time to time,
amend or modify any provision of this Plan except Section
6.4 and, with the consent of the Participant, make such
modifications of the terms and conditions of such
Participant's Award as it shall deem advisable. The
Committee, with the consent of the Participant, may also
amend the terms of any Option to provide that the Option
price of the shares remaining subject to the original Award
shall be reestablished at a price not less than 100% of the
Fair Market Value of the Common Stock on the effective date
of the amendment. No modification of any other term or
provision of any Option which is amended in accordance with
the foregoing shall be required, although the Committee may,
in its discretion, make such further modifications of any
such Option as are not inconsistent with or prohibited by
this Plan. No Awards may be granted during any suspension
of this Plan or after its termination.
(b) If an amendment would materially (i) increase the
benefits accruing to Participants, (ii) increase the
aggregate number of shares which may be issued under this
Plan, or (iii) modify the requirements of eligibility for
participation in this Plan, the amendment shall be approved
by the Board and, to the extent then required by applicable
law or deemed necessary or desirable by the Board, by a
majority of the shareholders.
(c) In the case of Awards issued before the effective
date of any amendment, suspension or termination of this
Plan, such amendment, suspension or termination of the Plan
shall not, without specific action of the Board or the
Committee and the consent of the Participant, in any way
modify, amend, alter or impair any rights or obligations
under any Award previously granted under the Plan.
6.8 Privileges of Stock Ownership.
Except as otherwise expressly authorized by the Committee
or under this Plan, a Participant shall not be entitled to
any privilege of stock ownership as to any shares of Common
Stock not actually delivered to and held of record by him or
her. No adjustment will be made for dividends or other
rights as a shareholder for which a record date is prior to
such date of delivery.
6.9 Effective Date of the Plan.
This Plan shall be effective upon its approval by the
Board, subject to approval by the shareholders of the
Company within twelve months from the date of such Board
approval.
6.10 Term of the Plan.
Unless previously terminated by the Board, this Plan shall
terminate ten years after the Effective Date of the Plan,
and no Awards shall be granted under it thereafter, but such
termination shall not affect any Award theretofore granted.
6.11 Governing Law.
This Plan and the documents evidencing Awards and all
other related documents shall be governed by, and construed
in accordance with, the laws of the State of California. If
any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue to be fully
effective.
6.12 Plan Construction.
(a) It is the intent of the Company that transactions in
and affecting Awards in the case of Participants who are or
may be subject to Section 16 of the Exchange Act satisfy any
then applicable requirements of Rule 16b-3 so that such
persons (unless they otherwise agree) will be entitled to
the benefits of such rule or other exemptive rules under
Section 16 of the Exchange Act in respect of those
transactions and will not be subjected to avoidable
liability thereunder. If any provision of the Plan or of
any Award would frustrate or otherwise conflict with the
intent expressed above, that provision to the extent
possible shall be interpreted as to avoid such conflict. If
the conflict remains irreconcilable, the Committee may
disregard the provision if it concludes that to do so
furthers the interest of the Company and is consistent with
the purposes of the Plan as to such persons in the
circumstances.
(b) It is the further intent of the Company that Options
and Stock Appreciation Rights with an exercise or base price
not less than Fair Market Value on the date of grant and
Performance Share Awards under Section 5.2 of this Plan that
are granted to or held by a person subject to Section 16 of
the Exchange Act shall qualify as performance-based
compensation under Section 162(m) of the Code, and this Plan
shall be interpreted consistent with such intent.
6.13 Non-Exclusivity of Plan.
Nothing in this plan shall limit or be deemed to limit the
authority of the Board to grant options, stock awards or
authorize any other compensations under any other plan or
authority.
VII. DEFINITIONS.
7.1 Definitions.
(a) "Award" means an Option, which may be designated as a
Nonqualified Stock Option or an Incentive Stock Option, a
Stock Appreciation Right, Restricted Stock Award,
Performance Share Award or Performance-Based Award.
(b) "Award Agreement" means a written agreement setting
forth the terms of an Award.
(c) "Award Date" means the date upon which the Committee
took the action granting an Award or such later date as is
prescribed by the Committee or, in the case of Options
granted under Section 2.6, the date specified in such
Section 2.6.
(d) "Beneficiary" means the person, persons, trust or
trusts entitled by will or the laws of descent and
distribution to receive the benefits specified under this
Plan in the event of a Participant's death.
(e) "Board" means the Board of Directors of the Company.
(f) "Cash-Based Awards" mean Awards that, if paid, must
be paid in cash and that are neither denominated in nor have
derived the value of, nor an exercise or conversion
privilege at a price related to, shares of Common Stock.
(g) "Cash Flow" shall mean cash and cash equivalents
derived from either (i) net cash flow from operations, or
(ii) net cash flow from operations, financings and investing
activities, as determined by the Committee at the time the
Award is granted.
(h) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(i) "Commission" means the Securities and Exchange
Commission.
(j) "Committee" means the Board or a committee appointed
by the Board to administer this Plan, which committee shall
be comprised only of two or more directors or such greater
number of directors as may be required under applicable law,
each of whom (i) in respect of any transaction at a time
when the affected Participant may be subject to Section
162(m) of the Code, shall be an "outside director" within
the meaning of Section 162(m) of the Code, and (ii) in
respect of any transaction at a time when the affected
Participant may be subject to Section 16 of the Exchange
Act, shall be a "Non-Employee Director" within the meaning
of Rule 16b-3(b)(3) under the Exchange Act.
(k) "Common Stock" means the Common Stock of the Company.
(l) "Company" means New Century Financial Corporation, a
Delaware corporation, and its successors.
(m) "Director" means member of the board of Directors of
the Company or any person performing similar functions with
respect to the Company.
(n) "Earnings Per Share" shall mean earnings per share of
Common Stock on a fully diluted basis determined by dividing
(i) net earnings, less dividends on any preferred stock of
the Company, by (ii) the weighted average number of common
shares and common share equivalents outstanding.
(o) "Eligible Employee" means (i) an officer or key
employee of the Company and (ii) any individual consultant
or advisor who renders or has rendered bona fide services
(other than services in connection with the offering or sale
of securities of the Company in a capital raising
transaction) to the Company, and who is selected to
participate in this Plan by the Committee.
(p) "Event" means any of the following:
(1) Approval by the shareholders of the Company of
the dissolution or liquidation of the Company;
(2) Approval by the shareholders of the Company of
an agreement to merge or consolidate, or otherwise
reorganize, with or into one or more entities other than
Subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting
entity are, or are to be, owned by former shareholders of
the Company; or
(3) Approval by the shareholders of the Company of
the sale of substantially all of the Company's business
assets to a person or entity which is not a Subsidiary.
(q) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(r) "Fair Market Value" means (i) if the stock is listed
or admitted to trade on a national securities exchange, the
closing price of the stock on the Composite Tape, as
published in the Western Edition of The Wall Street Journal,
of the principal national securities exchange on which the
stock is so listed or admitted to trade, on such date, or,
if there is no trading of the stock on such date, then the
closing price of the stock as quoted on such Composite Tape
on the next preceding date on which there was trading in
such shares; (ii) if the stock is not listed or admitted to
trade on a national securities exchange, the last price for
the stock on such date, as furnished by the National
Association of Securities Dealers, Inc. ("NASD") through the
NASDAQ National Market Reporting System or a similar
organization if the NASD is no longer reporting such
information; (iii) if the stock is not listed or admitted to
trade on a national securities exchange and is not reported
on the National Market Reporting System, the mean between
the bid and asked price for the stock on such date, as
furnished by the NASD; or (iv) if the stock is not listed or
admitted to trade on a national securities exchange, is not
reported on the National Market Reporting System and if bid
and asked prices for the stock are not furnished by the NASD
or a similar organization, the values established by the
Committee for purposes of the Plan.
(s) "Gain on Sale of Loans" means the total gain
recognized on loans sold through whole loan transactions or
through securitizations, net of premiums paid to acquire
such loans and net of expenses associated with the sale of
such loans, as reported in the Company's quarterly and/or
annual financial statements.
(t) "Incentive Stock Option" means an option which is
designated as an incentive stock option within the meaning
of Section 422 of the Code, the award of which contains such
provisions as are necessary to comply with that section.
(u) "Loan Production Volume" means loans funded during
any given period as reported in the Company's quarterly
and/or annual financial statements.
(v) "Loan Quality" means the number of loans originated
in accordance with the Company's underwriting policies and
procedures and is measured as loans sold, either
individually, through bulk sales transactions, or through
securitizations, at a premium price as a percentage of total
loans sold, based on information as reported in the
Company's quarterly and/or annual financial statements.
(w) "Non-Employee Director" means a member of the Board
who is not an officer or employee of the Company.
(x) "Non-Employee Director Participant" means a Non-
Employee Director who has been granted an Option under
Section 2.6.
(y) "Nonqualified Stock Option" means an option which is
designated as a Nonqualified Stock Option and shall include
any Option intended as an Incentive Stock Option that fails
to meet applicable legal requirements thereof. Any Option
granted hereunder that is not designated as an Incentive
Stock Option shall be deemed to be designated a Nonqualified
Stock Option under this Plan and not an incentive stock
option under the Code.
(z) "Officer" means a president, vice-president,
secretary, treasurer or principal financial officer,
comptroller or principal accounting officer and any person
routinely performing corresponding functions with respect to
the Company.
(aa) "Option" means an option to purchase Common Stock
under this Plan. An Option shall be designated by the
Committee as a Nonqualified Stock Option or an Incentive
Stock Option.
(ab) "Participant" means an Eligible Employee who has been
granted an Award or a Non-Employee Director Participant.
(ac) "Performance-Based Award" means an Award of a right
to receive shares of Common Stock or other compensation
(including cash) under Section 5.2, the issuance or payment
of which is contingent upon, among other conditions, the
attainment of performance objectives specified by the
Committee.
(ad) "Performance Goal" shall mean Cash Flow, Earnings Per
Share, Gain on Sale of Loans, Loan Production Volume, Loan
Quality, Return on Equity, Total Stockholder Return, or any
combination thereof.
(ae) "Performance Share Award" means an award of a right
to receive shares of cash or Common Stock under Section 5.1,
or to receive shares of Common Stock or other compensation
(including cash) under Section 5.2, the issuance or payment
of which is contingent upon, among other things, the
attainment of performance objectives specified by the
Committee.
(af) "Personal Representative" means the person or persons
who, upon the disability or incompetence of a Participant,
shall have acquired on behalf of the Participant by legal
proceeding or otherwise the power to exercise the rights and
receive the benefits specified in this Plan.
(ag) "Plan" means the New Century Financial Corporation
1995 Stock Option Plan, as amended.
(ah) "QDRO" means an order requiring the transfer of an
Award or portion thereof pursuant to a state domestic
relations law to the spouse, former spouse, child or other
dependent of a Participant. Such order must be in a form
substantially identical to a qualified domestic relations
order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended.
(ai) "Restricted Stock" means those shares of Common Stock
issued pursuant to a Restricted Stock Award which are
subject to the restrictions set forth in the related Award
Agreement.
(aj) "Restricted Stock Award" means an award of a fixed
number of shares of Common Stock to the Participant subject,
however, to payment of such consideration, if any, and such
forfeiture provisions, as are set forth in the Award
Agreement.
(ak) "Retirement" means retirement from employment by or
providing services to the Company or any Subsidiary after
age 65 and, in the case of employees, in accordance with the
retirement policies of the Company then in effect.
(al) "Return on Equity" means consolidated net income of
the Company (less any preferred dividends), divided by the
average consolidated common shareholders equity.
(am) "Rule 16b-3" means Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act as amended from time
to time.
(an) "Securities Act" means the Securities Act of 1933, as
amended.
(ao) "Stock Appreciation Right" means a right to receive a
number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, determined as provided in
Section 3.3 (a).
(ap) "Subsidiary" means any corporation or other entity a
majority or more of whose outstanding voting stock or voting
power is beneficially owned directly or indirectly by the
Company.
(aq) "Total Disability" means a "permanent and total
disability" within the meaning of Section 22(e)(3) of the
Code.
(ar) "Total Stockholder Return" means, with respect to the
Company or other entities (if measured on a relative basis),
the (i) change in the market price of its Common Stock (as
quoted on the principal market on which it is traded as of
the beginning and ending of the period) plus dividends and
other distributions paid, divided by (ii) the beginning
quoted market price, all of which is adjusted for any
changes in equity structure, including but not limited to
stock splits and stock dividends.
[O'Melveny & Myers LLP Letterhead]
May
26th
1 9 9 8
619,481-007
New Century Financial Corporation
18400 Von Karman Avenue, Suite 1000
Irvine, California 92612
Re: Registration on Form S-8 of New Century
Financial Corporation (the "Company")
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form
S-8 to be filed with the Securities and Exchange Commission in connection with
the registration under the Securities Act of 1933, as amended, of an
additional 500,000 shares of Common Stock, $0.01 par value per share, of the
Company (the "Common Stock"), to be issued pursuant to the New Century
Financial Corporation 1995 Stock Option Plan (the "Plan"). We have examined
the proceedings heretofore taken and to be taken in connection with the
authorization of the Plan and the Common Stock to be issued pursuant to and in
accordance with the Plan.
Based upon such examination and upon such matters of fact and law as
we have deemed relevant, we are of the opinion that the Common Stock has been
duly authorized by all necessary corporate action on the part of the Company
and, when issued in accordance with such authorization, the provisions of the
Plan and relevant agreements duly authorized by and in accordance with the
terms of the Plan, will be validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement.
Respectfully submitted,
/s/ O'Melveny & Myers LLP
The Board of Directors
New Century Financial Corporation
We consent to the incorporation by reference in the registration statement on
Form S-8 of New Century Financial Corporation of our report dated February 9,
1998, with respect to the consolidated balance sheets of New Century Financial
Corporation and subsidiary as of December 31, 1997 and 1996 and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the years ended December 31, 1997 and 1996 and the period from
November 17, 1995 (inception) through December 31, 1995, which appears in
the December 31, 1997, annual report on Form 10-K of New Century Financial
Corporation.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Orange County, California
May 22, 1998
